FIS - FINAL EXAM questions well
answered to pass
What is true about the "payback period" ? - correct answer ✔✔The payback period does not
consider the time value of money.
As the cost of capital increases - correct answer ✔✔Fewer projects are accepted.
The reason cash flow is used in capital budgeting is because: - correct answer ✔✔cash outlays
need to be evaluated in terms of the present value of the resultant cash inflows.
There are several disadvantages to the payback period - correct answer ✔✔*payback ignores
the time value of money.
* payback fails to choose the optimum or most economical solution to a capital budgeting
problem.
Capital budgeting is primarily concerned with: - correct answer ✔✔evaluating investment
alternatives.
The first step in the capital budgeting process is: - correct answer ✔✔idea development.
Which of the following statements about the "payback period" is true? - correct answer ✔✔The
payback period fails to produce an objective decision to accept or reject an individual project
The "payback method" has the following advantages: - correct answer ✔✔easy to understand,
emphasis on liquidity, quick view of investment risk.
, Prices of existing bonds move _________ as market interest rates move _________. - correct
answer ✔✔up; down
The document that outlines the covenants and duties existing between bondholders and the
issuing corporation is called: - correct answer ✔✔an indenture.
What is considered to be the most significant measure in determining the return on a bond? -
correct answer ✔✔Yield to maturity
The dollar interest received divided by the market price of the bond is called the: - correct
answer ✔✔current yield.
The higher the bond rating: - correct answer ✔✔the lower the interest rate on the bond.
The relationship between a bond's price and the yield to maturity: - correct answer ✔✔Is an
inverse relationship.
The dividend valuation model stresses the: - correct answer ✔✔relationship of dividends to
market prices.
Stock valuation models are dependent upon: - correct answer ✔✔expected dividends, future
dividend growth, and an appropriate discount rate.
Which is a characteristic of the cost of preferred stock? - correct answer ✔✔Preferred stock is
valued as a perpetuity.
A higher interest rate (discount rate) would: - correct answer ✔✔reduce the price of preferred
stock.
answered to pass
What is true about the "payback period" ? - correct answer ✔✔The payback period does not
consider the time value of money.
As the cost of capital increases - correct answer ✔✔Fewer projects are accepted.
The reason cash flow is used in capital budgeting is because: - correct answer ✔✔cash outlays
need to be evaluated in terms of the present value of the resultant cash inflows.
There are several disadvantages to the payback period - correct answer ✔✔*payback ignores
the time value of money.
* payback fails to choose the optimum or most economical solution to a capital budgeting
problem.
Capital budgeting is primarily concerned with: - correct answer ✔✔evaluating investment
alternatives.
The first step in the capital budgeting process is: - correct answer ✔✔idea development.
Which of the following statements about the "payback period" is true? - correct answer ✔✔The
payback period fails to produce an objective decision to accept or reject an individual project
The "payback method" has the following advantages: - correct answer ✔✔easy to understand,
emphasis on liquidity, quick view of investment risk.
, Prices of existing bonds move _________ as market interest rates move _________. - correct
answer ✔✔up; down
The document that outlines the covenants and duties existing between bondholders and the
issuing corporation is called: - correct answer ✔✔an indenture.
What is considered to be the most significant measure in determining the return on a bond? -
correct answer ✔✔Yield to maturity
The dollar interest received divided by the market price of the bond is called the: - correct
answer ✔✔current yield.
The higher the bond rating: - correct answer ✔✔the lower the interest rate on the bond.
The relationship between a bond's price and the yield to maturity: - correct answer ✔✔Is an
inverse relationship.
The dividend valuation model stresses the: - correct answer ✔✔relationship of dividends to
market prices.
Stock valuation models are dependent upon: - correct answer ✔✔expected dividends, future
dividend growth, and an appropriate discount rate.
Which is a characteristic of the cost of preferred stock? - correct answer ✔✔Preferred stock is
valued as a perpetuity.
A higher interest rate (discount rate) would: - correct answer ✔✔reduce the price of preferred
stock.
