Page 1 of 219
CORPORATE FINANCE 2025/2026 EXAM BANK
CURRENTLY TESTING QUESTIONS AND CORRECT
DETAILED ANSWERS (VERIFIED) /GUARANTEED
PASS/ TOP-RATED A+.
CORPORATE FINANCE
Ace your Corporate Finance exam with this definitive guide,
designed to master essential concepts in capital budgeting,
valuation, and financial statement analysis. This resource
delivers practical, scenario-based questions and step-by-step
solutions that build analytical skills for real-world decision-
making.
1) Stock A has an expected return of 12% with a standard
deviation of 8%. If returns are normally distributed, then
approximately two-thirds of the time the return on stock A
will be:
A) between 12% and 20%.
B) between 8% and 12%.
C) between -4% and 28%.
D) between 4% and 20%. ...... ANSWER ....... D
, Page 2 of 219
2) Investment A has an expected return of 15% per year,
while investment B has an expected return of 12% per year.
A rational investor will choose
A) investment A because of the higher expected return.
B) investment B because a lower return means lower risk.
C) investment A if A and B are of equal risk.
D) investment A only if the standard deviation of returns for A
is higher than the standard deviation of returns for B. ......
ANSWER ....... C
3) Of the following different types of securities, which is
typically considered most risky?
A) Long term corporate bonds
B) Long term government bonds
C) Common stocks of large companies
D) Common stocks of small companies ...... ANSWER .......
d
4) If you were to use the standard deviation as a measure of
investment risk, which of the following has historically been
the least risky investment?
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A) Common stock of large firms
B) U.S. Treasury bills
C) Common stock of small firms
D) Long-term government bonds ...... ANSWER ....... b
5) Changes in the general economy, like changes in interest
rates or tax laws represent what type of risk?
A) Company-unique risk
B) Market risk
C) Unsystematic risk
D) Diversifiable risk ...... ANSWER ....... b
6) Which of the following statements is most correct
concerning diversification and risk?
A) Risk-averse investors often choose companies from
different industries for their portfolios because the
correlation of returns is less than if all the companies came
from the same industry.
B) Risk-averse investors often select portfolios that include
only companies from the same industry group because the
familiarity reduces the risk.
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C) Only wealthy investors can diversify their portfolios
because a portfolio must contain at least 50 stocks to gain
the benefits of diversification.
D) Proper diversification generally results in the elimination
of risk. ...... ANSWER ....... a
7) You are considering investing in Ford Motor Company.
Which of the following are examples of diversifiable risk?
I. Risk resulting from possibility of a stock market crash.
II. Risk resulting from uncertainty regarding a possible strike
against Ford.
III. Risk resulting from an expensive recall of a Ford product.
IV. Risk resulting from interest rates decreasing.
A) I only
B) I and IV
C) I, II, III, IV
D) II, III ...... ANSWER ....... d
8) You are considering buying some stock in Continental
Grain. Which of the following are examples of non-
diversifiable risks?
I. Risk resulting from a general decline in the stock market.
CORPORATE FINANCE 2025/2026 EXAM BANK
CURRENTLY TESTING QUESTIONS AND CORRECT
DETAILED ANSWERS (VERIFIED) /GUARANTEED
PASS/ TOP-RATED A+.
CORPORATE FINANCE
Ace your Corporate Finance exam with this definitive guide,
designed to master essential concepts in capital budgeting,
valuation, and financial statement analysis. This resource
delivers practical, scenario-based questions and step-by-step
solutions that build analytical skills for real-world decision-
making.
1) Stock A has an expected return of 12% with a standard
deviation of 8%. If returns are normally distributed, then
approximately two-thirds of the time the return on stock A
will be:
A) between 12% and 20%.
B) between 8% and 12%.
C) between -4% and 28%.
D) between 4% and 20%. ...... ANSWER ....... D
, Page 2 of 219
2) Investment A has an expected return of 15% per year,
while investment B has an expected return of 12% per year.
A rational investor will choose
A) investment A because of the higher expected return.
B) investment B because a lower return means lower risk.
C) investment A if A and B are of equal risk.
D) investment A only if the standard deviation of returns for A
is higher than the standard deviation of returns for B. ......
ANSWER ....... C
3) Of the following different types of securities, which is
typically considered most risky?
A) Long term corporate bonds
B) Long term government bonds
C) Common stocks of large companies
D) Common stocks of small companies ...... ANSWER .......
d
4) If you were to use the standard deviation as a measure of
investment risk, which of the following has historically been
the least risky investment?
, Page 3 of 219
A) Common stock of large firms
B) U.S. Treasury bills
C) Common stock of small firms
D) Long-term government bonds ...... ANSWER ....... b
5) Changes in the general economy, like changes in interest
rates or tax laws represent what type of risk?
A) Company-unique risk
B) Market risk
C) Unsystematic risk
D) Diversifiable risk ...... ANSWER ....... b
6) Which of the following statements is most correct
concerning diversification and risk?
A) Risk-averse investors often choose companies from
different industries for their portfolios because the
correlation of returns is less than if all the companies came
from the same industry.
B) Risk-averse investors often select portfolios that include
only companies from the same industry group because the
familiarity reduces the risk.
, Page 4 of 219
C) Only wealthy investors can diversify their portfolios
because a portfolio must contain at least 50 stocks to gain
the benefits of diversification.
D) Proper diversification generally results in the elimination
of risk. ...... ANSWER ....... a
7) You are considering investing in Ford Motor Company.
Which of the following are examples of diversifiable risk?
I. Risk resulting from possibility of a stock market crash.
II. Risk resulting from uncertainty regarding a possible strike
against Ford.
III. Risk resulting from an expensive recall of a Ford product.
IV. Risk resulting from interest rates decreasing.
A) I only
B) I and IV
C) I, II, III, IV
D) II, III ...... ANSWER ....... d
8) You are considering buying some stock in Continental
Grain. Which of the following are examples of non-
diversifiable risks?
I. Risk resulting from a general decline in the stock market.
