...Chapter 6—The Tradeoff Between Risk and Return MULTIPLE CHOICE 1. Which of the following is an example of systematic risk? a. IBM posts lower than expected earnings. b. Intel announces record earnings. c. The national trade deficit is higher than expected. d. None of the above. ANS: C DIF: E REF: 6.4 The Power of Diversification 2. Which of the following is an example of unsystematic risk? a. IBM posts lower than expected earnings. b. The Fed raises interest rates unexpectedly. c. The rate of inflation is higher than expected. d. None of the above. ANS: A DIF: E REF: 6.4 The Power of Diversification 3. What do you call the portion of your total return on a stock investment that is caused by an increase in the value of the stock. a. Dividend yield. b. Risk-free return. c. Capital gain. d. None of the above. ANS: C DIF: E REF: 6.1 Understanding Returns 4. What is one of the most important lessons from capital market history? a. Risk does not matter. b. There is a positive relationship between risk and return. c. You are always better off investing in stock. d. T-bills are the highest yielding investment. ANS: B DIF: E REF: 6.2 The History of Returns 5. What is the purpose of diversification? a. Maximize possible returns. b. Increase the risk of your portfolio. c. Lower the overall risk of your portfolio. d. None of the above. ANS: C DIF: E REF: 6.4 The Power of Diversification NARRBEGIN: Bavarian Sausage Bavarian Sausage You bought a share of Bavarian Sausage stock...
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...50 MC questions Chapter 7, 8, and 9 Test review * Risk * It’s the possibility of a loss, the uncertainty of a return that will never be achieved * What are the two components of risk? * Unsystematic risk (diversifiable risk) * Business risk * Financial risk * Can be eliminated through diversification * Systematic risk (non diversifiable risk) * Market risk * Interest rate risk * Reinvestment risk * Purchasing power risk * How are they measured? * (portfolio risk) Total risk= diversifiable + non-diversifiable * Standard deviation measures total risk * Beta coefficient measures systematic risk (Non-diversifiable risk) * High beta, high risk * Which component can be reduced (diversified away)? How? * Diversifiable risk * Eliminates unsystematic risk and reduces total risk * Correlation and the ranges between -1 and 1 * Systematic risk is reduced through portfolio diversification * Distinguish expected returns, realized returns, and required returns. * Expected return- an estimate on your return, incentive for accepting risk * Realized return- * Required return- return necessary to induce an individual to make an investment * What is risk premium? * refers to the amount by which an asset's expected rate of return exceeds the risk-free interest rate. * What are the two...
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...Practice Questions for Final Exam FIR 3710 Fall 2003 1. If a firm issues no new equity, book value will _______________________. A) decrease each year by the amount of retained earnings B) decrease each year by the amount of retained earnings minus depreciation on fixed assets C) increase each year by the amount of retained earnings D) increase each year by the amount of retained earnings plus depreciation on fixed assets 2. A firm has a ROE of 20% and a market-to-book ratio of 2.38. Its P/E ratio is __________. A) 8.40 B) 11.90 C) 17.62 D) 47.60 3. Rose Hill Trading Company is expected to have EPS in the upcoming year of $6.00. The expected ROE is 18.0%. An appropriate required return on the stock is 14%. If the firm has a plowback ratio of 60%, its growth rate of dividends should be __________. A) 2.5% B) 4.0% C) 8.4% D) 10.8% 4. Riskier firms tend to have P/E ratios that are _________ the P/E ratios of less risky firms. A) higher than B) equal to C) lower than D) There is not necessarily any linkage between risk and P/E ratios 5. __________ is equal to (common shareholders' equity/common shares outstanding). A) book value per share B) liquidation value per share C) market value per share D) Tobin's...
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...Sample Final Exam 1. The term planning involves a. the development of future objectives and the preparation of various budgets to achieve these objectives. b. the steps taken to ensure that objectives set down by management are attained. c. the steps taken to ensure that all parts of the organization function in a manner consistent with organizational policies. d. comparing budgeted and actual results and taking steps to remedy unacceptable variations. 2. Self-imposed budgets typically are a. not subject to review by higher levels of management since to do so would contradict the participative aspect of the budgeting processing. b. not subject to review by higher levels of management except in specific cases where the input of higher management is required. c. subject to review by higher levels of management in order to prevent such self-imposed budgets from becoming too loose and allowing too much freedom in activities. d. not critical to the success of a budgeting program. 3. Which of the following statements is not correct? a. The sales budget is the starting point in preparing the master budget. b. The sales budget is constructed by multiplying the expected sales in...
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...1. Explain in general terms how savings institutions differ from commercial banks with respect to their sources of funds and uses of funds. Discuss each source of funds for savings institutions. Identify and discuss the main uses of funds for savings institutions. Savings institutions obtain a large portion of their funds from savings deposits, more than large commercial banks. While savings institutions can offer NOW accounts, they cannot offer the traditional demand deposits. Savings institutions concentrate on mortgages as their main use of funds. Commercial banks concentrate on commercial loans and some consumer loans. The major sources of funds for savings institutions 1. Deposits, which include passbook savings, retail CDs, and money market deposit accounts; 2. Borrowed funds, which come from either their district Federal Home Loan Bank for an extended length of time, the Federal Reserve discount window for very short-term loans, through repurchase agreements, and in the federal funds market; 3. Capital obtained by issuing stock and retaining earnings. The main uses of funds for savings institutions are: 1. Cash to satisfy reserve requirements enforced by the Federal Reserve System and to accommodate withdrawal requests of depositors; 2. Mortgages where the real estate represented serves as collateral to guard against default risk; 3. Mortgage-backed securities issued by other savings institutions that were in need of funds; 4. Investment securities...
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...BLAW 2210 Term Paper Career Preparation My top two career choices are corporate financial analysis in investment banking and actuary. I will be discussing the legal environment of my career choices, taxing authorities, entity structure, graduate school in order to obtain certain license, self-assessment of my chosen careers. First, I will discuss how I can work as a corporate financial analysis in investment banking. After that, I will talk about what I need prepare to be an actuary. 1.corporate financial planning and analysis The responsibility of a corporate financial planing and analysis is to support management planning and decision making by identifying, maintaining, and evaluating information,as well as recommending actions. * Legal environment * Entity structure Investment banking is concerned with the primary function of assisting the capital market in its function of capital market intermediation, i.e. the movement of financial resources from those who have them means investors, to those who need to make use of them means issuer for generating profit. Therefore, it can be inferred that investment banks are those institutions that are the counterparts of banks in the capital market in the function of intermediation in resources allocation. Investment banks carried on carious activities it helps companies and governments and their agencies to raise money by issuing and selling securities in the primary market. They assist public and private corporations...
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...Question 1 10 points Save Macomb Corporation is a U.S. firm that invoices some of its exports in Japanese yen. If it expects the yen to weaken, it could ____ to hedge the exchange rate risk on those exports. sell yen put options buy yen call options buy futures contracts on yen sell futures contracts on yen Question 2 10 points Save A U.S. corporation has purchased currency put options to hedge a 100,000 Canadian dollar (C$) receivable. The premium is $.01 and the exercise price of the option is $.75. If the spot rate at the time of maturity is $.85, what is the net amount received by the corporation if it acts rationally? $74,000. $84,000. $75,000. $85,000. Question 3 10 points Save Magent Co. is a U.S. company that has exposure to the Swiss francs (SF) and Danish kroner (DK). It has net inflows of SF200 million and net outflows of DK500 million. The present exchange rate of the SF is about $.40 while the present exchange rate of the DK is $.10. Magent Co. has not hedged these positions. The SF and DK are highly correlated in their movements against the dollar. If the dollar weakens, then Magent Co. will: benefit, because the dollar value of its SF position exceeds the dollar value of its DK position. benefit, because the dollar value of its DK position exceeds the dollar value of its SF position. be adversely affected...
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...University 01/2010 – Present Director Assistant, Canadian Chamber of Commerce in Shanghai 06/2009 – 08/2009 • Designed 2010 Expo Guide for Canadians in Shanghai. • Coordinated events on Canada’s Day and assisted Administrative Director with related projects • Located and entered data into several databases; made phone calls, and ensured timely mail processing. • Assisted administrative team members with clerical function. Dining Service Associate, University of Minnesota – Twin Cities 09/2009 – 12/2009 • Maintained inventory of standard dining service supplies and assists manager coordinate attendants. Member, Actuarial Club in University of Minnesota – Twin Cities 01/2009 – 12/2009 • Arranged the preparation of Casualty Actuarial Society (CAS) exam Volunteer, Students Today Leaders Forever 03/2009 – 12/2009 • Assisted the donation of food to Minnesotans at risk of hunger. Volunteer, in school for the Mute and the Deaf in Zhoushan, Zhejiang Province 2006 – 2009 • Taught disabled students Mandarin. Policy-analyst, Model United Nation in Shanghai K.J. Senior High School 2006 – 2008 • Analyzed UN policies for Model UN conferences HONORS/ AWARDS Honor Program, Awarded by Associate Dean of University of Minnesota – Twin Cities Global Excellent Scholarship, Awarded by University of Minnesota – Twin Cities Dean's List, Awarded by University of Minnesota – Twin Cities st th 1 prize, World 20 Odyssey of Mind Competition in China Area 09/2008 – 12/2009 09/2008 – 12/2009 Fall 2008, Fall 2009...
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...CORPORATION FINANCE FINAL EXAM Summer 2008 NAME _____________________________________________ STUDENT NUMBER _________________________________ CLASS DAYS/TIME _______________ INSTRUCTOR _________________________ READ THE FOLLOWING DIRECTIONS VERY CAREFULLY. FAILURE TO FOLLOW THESE INSTRUCTIONS WILL ALMOST CERTAINLY RESULT IN YOUR EXAM BEING MISGRADED WHICH WILL ADVERSELY AFFECT YOUR GRADE. IF THERE IS ANYTHING ABOUT THE DIRECTIONS THAT YOU DO NOT UNDERSTAND, ASK YOUR INSTRUCTOR IMMEDIATELY. 1. Fill in your name, student number, and the days and time of the class for which you are registered (for example, T/TH at 5:00pm) on the Answer Sheet as well as on the lines above. 2. In the box on the Answer sheet titled “TEST NUMBER” record the number that appears in the upper right hand corner of this sheet on the line “TEST NUMBER” – since there are multiple versions of the exam, failure to do so may result in your exam being graded with the wrong answer key!!! DO NOT COPY FROM SOMEONE ELSE’S EXAM – YOUR NEIGHBOR MAY HAVE A DIFFERENT VERSION OF THE EXAM!!! 3. Read each question very carefully. Consider all of the answer choices and then select the best correct answer – there is only one best answer per question. Circle the letter answer on the exam and record your answers on the Answer Sheet. NOTE WELL: ONLY THE ANSWER KEY WILL BE GRADED!!! 4. You may use a financial calculator. No notes, formula sheets, scratch paper (use back pages of exam if necessary)...
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...FINANCE –EXAM 3 1. The Hasting Company began operations on January 1, 2003 and uses the FIFO method in costing its raw material inventory. An analyst is wondering what net income would have been if the company had consistently followed LIFO (instead of FIFO) from the beginning, 1/1/2003. He has the following information available to him: What would net income have been in 2004 if Hastings had used LIFO since 1/1/2003? $ 110,000 $ 150,000 $ 170,000 $ 230,000 2. A customer is currently suing a company. A reasonable estimate can be made of the costs that would result from a ruling unfavorable to the company, and the amount involved is material. The company's managers, lawyers, and auditors agree that there is only a remote likelihood of an unfavorable ruling. This contingency: Should be disclosed in a footnote. ERRADO, DEVE SER OUTRA Should be disclosed as a parenthetical comment in the balance sheet. Need not to be disclosed. Should be disclosed by an appropriation of retained earnings. 3. The ABC Company operates a catering service specializing in business luncheons for large corporations. ABC requires customers to place their orders 2 weeks in advance of the scheduled events. ABC bills its customers on the tenth day of the month following the date of service and requires that payment be made within 30 days of the billing date. Collections from customers have never been an issue in the past. ABC should recognize revenue from its catering services at...
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...Elective Modules Blueprint – Jan 2015 update OVERALL EXAM – Assurance Elective Assessment format (as recommended in the Assessment Report): Objective-Format Portion Case-Based Portion 0-25% of the exam 75% to 100% of the exam Testing only competencies within the assurance elective Maximum time for any one case is 120 minutes. Cases will have a strong assurance focus, but will integrate one or two other competency areas. Up to 30 questions For the first Elective examination, candidates can expect to see approximately 15 objective-format questions based on the time estimated for the two cases. Other Information The exam is designed to be completed by an average candidate in three (3) hours; however, candidates will be allowed four (4) hours to write. Time estimates for the questions are based on a three-hour examination. Candidates are responsible for managing the time allocation between the objective-format portion and the case portion as it will not be controlled as part of the examination. Until otherwise advised, for the Elective examinations, candidates can expect two cases for a total of 150 minutes, where the maximum time for any one case is 90 minutes and the minimum is 60 minutes. Candidates will be advised if and when the cases begin to exceed 90 minutes. Chartered Professional Accountants of Canada, CPA Canada, CPA are trademarks and/or certification marks of the Chartered Professional Accountants of Canada. ...
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...University of Notre Dame Mendoza College of Business Department of Finance FIN 70500 – Multinational Financial Management Module 1, Fall, 2006 |Instructor: |Jerry G. Langley |Phone: |Office - (574) 631-6078 | | Office: |262 MCOB | |Home - (574) 234-1191 (before10PM) | |E-mail: |Jerry.Langley.3@nd.edu | | | | Office hours: I’m in my office most of the week, so stop by or call and set up a time to see me. | COURSE OBJECTIVES This course covers various aspects of the international side of finance, including organizational issues that impact the financial decision-making process. After an overview of the international financial environment companies operate in, we will learn how they organize themselves to do business internationally, the impact of volatile exchange rates and how they can be measured and managed to minimize effects on economic and reported results. In addition to looking at the theoretical underpinnings of international finance, we will also cover the practical side of financing decisions – how corporations actually use these tools to manage the potential impacts on their business that come from operating around the world. We’ll also...
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...FIN 370 Week 1 Individual Assignment Defining Financial Terms Get Tutorial by Clicking on the link below or Copy Paste Link in Your Browser https://hwguiders.com/downloads/fin-370-week-1-individual-assignment-defining-financial-terms/ For More Courses and Exams use this form ( http://hwguiders.com/contact-us/ ) Feel Free to Search your Class through Our Product Categories or From Our Search Bar (http://hwguiders.com/ ) Finance System including circulation for money, grant of credit, investment opportunities, and banking faculties Without finance, there would be no resource allocations for operating or functional expenditures. Efficient market Efficient market, information is simultaneously available with corresponding funds example – stock market To make intellectual and well-intended fiscal decisions, information pertaining to funds must be readily accessible and available to provide insight and information for clients/investors/brokers. Primary market A market where the security is purchased directly from the issuer by the investor The primary market allows companies to offer bonds and stock to the public for the first time. It is closely related to the secondary market dependent upon one another to be most effective. Secondary market The transactions of stock from investors and dealers without the involvement of the company This market allows for the trading and selling of shares in stock. Without this market, the stock market would not exist...
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...IBM Global Business Services Financial Management White Paper Supporting IFRS Compliance with SAP Enterprise Resource Planning System Sign In • Register • Free Annual Reports • Free Tools Dictionary Investing Markets Personal Finance Active Trading Forex Professionals Tutorials Video Simulator Free Newsletters Global Professional Exams FINRA Exams Canadian Professional Exams Careers Continuing Education Exam Prep Quizzer FAQs Calculators Tweet 1 Disqus Email Print Feedback Frequently Asked Question November 18 2009 | Filed Under » Accounting, Consumer Goods, Electronics Should computer software be classified as an intangible asset or part of property, plant and equipment? In accounting terms, an intangible asset is something of value that is not of physical nature. On the other hand, property, plant and equipment (PPE) are just as the name suggests. PPE refers to physical long-term assets, such equipment that is vital to a company's operations and has a definite physical component. Under most circumstances, computer software is classified as an intangible asset because of its non physical nature. However, accounting rules state that there are certain exceptions that permit the classification of computer software as Property Plant and Equipment (PPE). Some of the statements that have rules concerning the classification of software include: Financial...
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... Corporate Finance, Stephen A. Ross, Randolph W. Westerfield, and Jeffrey Jaffe (RWJ), Irwin/McGraw-Hill. (you should have this from the core class). 2. Damodaran on Valuation, Wiley. 3. Spreadsheet Modeling in Corporate Finance by Craig Holden, Prentice Hall. 4. Analysis for Financial Management, Robert C. Higgings, Irwin/McGraw-Hill. 5. MBA’s Guide to Microsoft Excel 2000, Stephen L. Nelson, Redmond Technology Press. Course Packet: The course packet contains the cases that will be assigned during the semester. Assignments and lecture notes will be distributed in class. Exams: There will be one take-home final exam. The final exam will be based on spreadsheets built using techniques for financial modeling developed throughout the course. The exam will require individual ability to perform advanced financial modeling using a spreadsheet. Class Participation: A vibrant class discussion will raise the level of enjoyment and learning for all of us. Therefore, it will help if you take the time to prepare and do the readings before the class. You should read the assigned chapters before coming to the lectures. In addition to discussing the material, you should also be familiar with the modeling techniques and spreadsheet tools used in each class. Grading Policy: 1. Late assignments are never accepted for credit unless there are extenuating circumstances and I have granted permission prior to the due date. 2. There is no make-up for the final exam. If you miss...
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