PrinciplesofFinance-TestBank-Ch11.docx PrinciplesofFinance-TestBank-Ch11.docx PrinciplesofFinance-TestBank-Ch11.docx
TEST BANK
Principles of Finance
s
03/30/22 1
PrinciplesofFinance-TestBank-Ch11.docx PrinciplesofFinance-TestBank-Ch11.docx PrinciplesofFinance-TestBank-Ch11.docx
, PrinciplesofFinance-TestBank-Ch11.docx PrinciplesofFinance-TestBank-Ch11.docx PrinciplesofFinance-TestBank-Ch11.docx
Principles of Finance
Chapter 11
Test Bank
Stocks and Stock Valuation
True or False Questions
1. Using a company’s P/E ratio to establish its value is an example of relative valuation.
A. True
B. False
Section 11.1 LO 1 Easy
2. Two key elements of efficient markets are full availability of financial information about
relevant companies and full use of this information to make investment decisions.
A. True
B. False
Section 11.5 LO 5 Moderate
Multiple Choice Questions
1. Stocks do not promise any specified cash flows in the form of coupons or a face value
payment at some point in the future. Instead, stocks are attractive to many investors for what
reason?
A. Stocks are safer investments than most other instruments, such as bonds.
B. Investing in stock has tax advantages for the investor.
C. Returns on stock are consistently higher than other asset classes, such as bonds.
D. Stock can be “put” back to the issuing company if the company’s condition deteriorates.
Section 11.1 LO 1 Moderate
2. When stock is bought and sold among investors, this is known as what?
A. Initial public offering
B. Secondary market
C. Over-the-counter market
D. Derivatives market
Section 11.1 LO 1 Easy
03/30/22 2
PrinciplesofFinance-TestBank-Ch11.docx PrinciplesofFinance-TestBank-Ch11.docx PrinciplesofFinance-TestBank-Ch11.docx
TEST BANK
Principles of Finance
s
03/30/22 1
PrinciplesofFinance-TestBank-Ch11.docx PrinciplesofFinance-TestBank-Ch11.docx PrinciplesofFinance-TestBank-Ch11.docx
, PrinciplesofFinance-TestBank-Ch11.docx PrinciplesofFinance-TestBank-Ch11.docx PrinciplesofFinance-TestBank-Ch11.docx
Principles of Finance
Chapter 11
Test Bank
Stocks and Stock Valuation
True or False Questions
1. Using a company’s P/E ratio to establish its value is an example of relative valuation.
A. True
B. False
Section 11.1 LO 1 Easy
2. Two key elements of efficient markets are full availability of financial information about
relevant companies and full use of this information to make investment decisions.
A. True
B. False
Section 11.5 LO 5 Moderate
Multiple Choice Questions
1. Stocks do not promise any specified cash flows in the form of coupons or a face value
payment at some point in the future. Instead, stocks are attractive to many investors for what
reason?
A. Stocks are safer investments than most other instruments, such as bonds.
B. Investing in stock has tax advantages for the investor.
C. Returns on stock are consistently higher than other asset classes, such as bonds.
D. Stock can be “put” back to the issuing company if the company’s condition deteriorates.
Section 11.1 LO 1 Moderate
2. When stock is bought and sold among investors, this is known as what?
A. Initial public offering
B. Secondary market
C. Over-the-counter market
D. Derivatives market
Section 11.1 LO 1 Easy
03/30/22 2
PrinciplesofFinance-TestBank-Ch11.docx PrinciplesofFinance-TestBank-Ch11.docx PrinciplesofFinance-TestBank-Ch11.docx
