FIN 370 SANNING EXAM 1
QUESTIONS AND ANSWERS GRADED
A+
True or False Questions - Correct answer-
Question 1 T/F: Forms of business - conceptual - Correct answer-Proprietorship
(owned by one individual, easy to form, few regulations, no corp taxation, difficult
to fund, unlimited liability, lifetime limited)
Partnership (two or more entities, similar to proprietorship, can be limited (LLC))
Corporations (legal entity created under state laws, separate and distinct from
owners/managers)
S Corps (dont pay income taxes)
Question 2 T/F: Adv/Disadv of Corporation's- conceptual - Correct answer-
Advantages:
Unlimited live
Easy transferability of ownership interest (stock transfers)
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
, Limited Liability (losses limited to original investment)
Disadvantages:
Double Taxation (the earnings of the corporation are taxed at the corporate level,
and then earnings paid out as dividends are taxed again as income to the
stockholders)
Setting up a corporation involves preparing a charter, writing a set of bylaws, and
filing the many required state and federal reports, which is more complex and
time-consuming than creating a proprietorship or a partnership.
Optimal Portfolio - Correct answer-Found at the tangency point b/ween efficient
set of portfolios and one of the investor's indifference curves
This tangency point marks the highest level of satisfaction the investor can attain
The standard deviation of stock returns of Park Corporation is 55%. The standard
deviation of the market return is 15%. If the correlation between Park and the
market is 0.40, what is Park's beta? - Correct answer-(std of stock returns/std mkt
return)*coorelation
(.55/.15)*.40 = 1.5
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
QUESTIONS AND ANSWERS GRADED
A+
True or False Questions - Correct answer-
Question 1 T/F: Forms of business - conceptual - Correct answer-Proprietorship
(owned by one individual, easy to form, few regulations, no corp taxation, difficult
to fund, unlimited liability, lifetime limited)
Partnership (two or more entities, similar to proprietorship, can be limited (LLC))
Corporations (legal entity created under state laws, separate and distinct from
owners/managers)
S Corps (dont pay income taxes)
Question 2 T/F: Adv/Disadv of Corporation's- conceptual - Correct answer-
Advantages:
Unlimited live
Easy transferability of ownership interest (stock transfers)
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
, Limited Liability (losses limited to original investment)
Disadvantages:
Double Taxation (the earnings of the corporation are taxed at the corporate level,
and then earnings paid out as dividends are taxed again as income to the
stockholders)
Setting up a corporation involves preparing a charter, writing a set of bylaws, and
filing the many required state and federal reports, which is more complex and
time-consuming than creating a proprietorship or a partnership.
Optimal Portfolio - Correct answer-Found at the tangency point b/ween efficient
set of portfolios and one of the investor's indifference curves
This tangency point marks the highest level of satisfaction the investor can attain
The standard deviation of stock returns of Park Corporation is 55%. The standard
deviation of the market return is 15%. If the correlation between Park and the
market is 0.40, what is Park's beta? - Correct answer-(std of stock returns/std mkt
return)*coorelation
(.55/.15)*.40 = 1.5
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
