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FINA 3315 MIDTERM 2026
ACTUAL QUESTIONS WITH
VERIFIED ANSWERS.
Investors who limit themselves to low risk or risk free
investments may still be subject to:
A. liquidity risk.
B. market risk.
C. event risk.
D. purchasing power risk. - correct answer-D. purchasing
power risk.
The internal rate of return is the rate of return that causes a
project to have a zero net present value. T/F? - correct answer-
True
If the discount rate is appropriate for the level of risk, a
satisfactory investment will have a present value of benefits
equal to or greater than than the present value of costs. T/F? -
correct answer-True
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If the present value of an investment's benefits equals the
present value of the investment's costs, then the investor would
earn a
A. return equal to the discount rate.
B. negative rate of return.
C. 0% rate of return.
D. return greater than the discount rate. - correct answer-A.
return equal to the discount rate.
A petroleum refinery in the Gulf region is forced to shut down
for several months because of hurricane damage. This is an
example of
A. business risk.
B. speculation.
C. event risk.
D. market risk. - correct answer-C. event risk.
Short-term U. S. Treasury bills are yielding 0.5%. The expected
inflation rate is 2%. Therefore, the real rate of interest must be -
1.5%. T/F? - correct answer-True
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Christopher invests $400 today at a 4% rate of return which is
compounded annually. What is the future value of this
investment after four years?
A. $342
B. $464
C. $416
D. $468 - correct answer-D. $468
Bob's house has doubled in value since he bought it 30 years
ago. The house's value has increased by an annual rate of
A. 6.67%.
B. 3.33%.
C. 2.34%.
D. 100% - correct answer-C. 2.34%.
Liquidity is best described as:
(Select the best answer below.)
A. wanting to minimize the risk of loss and maintain purchasing
power.
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B. wanting a portfolio to grow over time in real terms to meet
future needs.
C. converting an asset into cash without much of a price
concession. - correct answer-C. converting an asset into cash
without much of a price concession.
For a stock with a margin requirement of 40%, how much cash
is required, expressed as a percentage of the purchase cost?
(Select the best answer below.)
A. 40%
B. 50%
C. zero - correct answer-A. 40%
OKAY stock has a beta of 0.8. The market as a whole is
expected to decline by 12% thereby causing OKAY stock to
A. increase by 12%.
B. increase by 9.6%.
C. decline by 9.6%.
D. decline by 12.5%. - correct answer-C. decline by 9.6%.
FINA 3315 MIDTERM 2026
ACTUAL QUESTIONS WITH
VERIFIED ANSWERS.
Investors who limit themselves to low risk or risk free
investments may still be subject to:
A. liquidity risk.
B. market risk.
C. event risk.
D. purchasing power risk. - correct answer-D. purchasing
power risk.
The internal rate of return is the rate of return that causes a
project to have a zero net present value. T/F? - correct answer-
True
If the discount rate is appropriate for the level of risk, a
satisfactory investment will have a present value of benefits
equal to or greater than than the present value of costs. T/F? -
correct answer-True
, Page | 2
If the present value of an investment's benefits equals the
present value of the investment's costs, then the investor would
earn a
A. return equal to the discount rate.
B. negative rate of return.
C. 0% rate of return.
D. return greater than the discount rate. - correct answer-A.
return equal to the discount rate.
A petroleum refinery in the Gulf region is forced to shut down
for several months because of hurricane damage. This is an
example of
A. business risk.
B. speculation.
C. event risk.
D. market risk. - correct answer-C. event risk.
Short-term U. S. Treasury bills are yielding 0.5%. The expected
inflation rate is 2%. Therefore, the real rate of interest must be -
1.5%. T/F? - correct answer-True
, Page | 3
Christopher invests $400 today at a 4% rate of return which is
compounded annually. What is the future value of this
investment after four years?
A. $342
B. $464
C. $416
D. $468 - correct answer-D. $468
Bob's house has doubled in value since he bought it 30 years
ago. The house's value has increased by an annual rate of
A. 6.67%.
B. 3.33%.
C. 2.34%.
D. 100% - correct answer-C. 2.34%.
Liquidity is best described as:
(Select the best answer below.)
A. wanting to minimize the risk of loss and maintain purchasing
power.
, Page | 4
B. wanting a portfolio to grow over time in real terms to meet
future needs.
C. converting an asset into cash without much of a price
concession. - correct answer-C. converting an asset into cash
without much of a price concession.
For a stock with a margin requirement of 40%, how much cash
is required, expressed as a percentage of the purchase cost?
(Select the best answer below.)
A. 40%
B. 50%
C. zero - correct answer-A. 40%
OKAY stock has a beta of 0.8. The market as a whole is
expected to decline by 12% thereby causing OKAY stock to
A. increase by 12%.
B. increase by 9.6%.
C. decline by 9.6%.
D. decline by 12.5%. - correct answer-C. decline by 9.6%.
