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Midterm Questions
Cross Cultural And Global Mgmt (MGMT 461)
George Mason University
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Fall 2023Preview text
MIDTERM QUESTIONS
- Which one of the following best states the PRIMARY goal of financial management? Maximize the current value per share
- If you double the monthly payment on a fixed rate loan, the loan will be paid off in: Less than half the time
- Which of the following are advantages of the corporate form of business ownership?
ii. Double taxationi. Limited liability for firm debt iii. Ability to raise capital iv. Unlimited firm life I, III, IV 4. Which of the following could be a potential solution to the agency problem between managers and shareholders? Giving the managers a part of the company though stock-based compensation 5. Which of the follow statements are true? i. There is an inverse relationship between interest rates and future values ii. The effective annual interest rate (EAR) will be higher than the annual percentage rata loan that compounds interest annually e (APR) for iii. There is an inverse relationship between present values and interest rates iv. All else equal, the more frequent interest is compounded on a loan, the more interest you will have to pay III and IV 6. The internal rate of return for a project will increase if: The initial cost of the project is reduced 7. If a project is assigned a required rate of return equal to zero, then: The timing of the project’s cash flows has no bearing on the value of the project 8. Which of the following are definite indicators of an accept decision for an independent project with conventional cash flows? i. Positive net present value iii. Profitability index greater than zeroInternal rate of return greater than the require rate iv. Positive internal rate of return
I and III 9. You own a bond that has a 7% coupon and matures in 12 years. You purchased this bond at par value when it was originally issued. If the current market rate for this type and quality of bond is 7%, then you would expect: To realize a capital loss if you sold the bond at the market price 10. Which of the following bonds would have the highest price sensitivity to changes in interest rates? 30-year zero-coupon bond 11. Which of the following is NOT true regarding the term structure of interest rates, i. the yield curve? Yield curves can only be plotted for zero-coupon bonds 12. Which of the follow will happen when the yield on a bond goes up, assuming nothing else changes?
ii. The coupon payments will decreasei. The coupon payments will increase iii. The face value of the bond will increase iv. The bond price will decrease IV only 13. Which of the following would you expect to happen in U. treasury markets if rating agencies downgraded U. government debt due to COVID-19? ii. U. treasury yields would go downU. treasury yields would go up iii. Face-values of U. treasuries would go down iv. Face-values of U. treasuries would go up II. only 14. Which of the following factors cause the yield on a corporate bond to differ from those on a comparable Treasury security? ii. Interest rate riski. Inflation risk iii. Taxability iv. Default risk III and IV 15. The value of a common stock today depends on: Thee expected future dividends, capital gains, and the required rate of return 16. Which of the follow is/are true regarding debt and equity? i. Debt is a liability of the firm, whereas equity is not
i. Initial investment amount ii. Book value of initial investment at the end of the project iii. Opportunity costs iv. Sunk costs I, II, and III
Midterm Questions
Course: Cross Cultural And Global Mgmt (MGMT 461)
University: George Mason University
