Ultimate Trivia On Finance! Quiz Questions

21 Questions | Total Attempts: 223

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Ultimate Trivia On Finance! Quiz Questions

Finance is a wide-ranging term that describes activities associated with banking, leverage, debt, capital markets, money, and investments. Finance also involves cooperative creation and the study of money. According to this quiz, you will need to know which form of invested capital is subject to the firm’s business and financial risk and the ultimate owner of an ongoing corporation. This quiz proves that the best things in life are free, including a high score on this quiz.


Questions and Answers
  • 1. 
    If you would like to work in finance by trading debt and equity securities for the customer then which finance career classification should you target? 
    • A. 

      Corporate finance

    • B. 

      Commercial banking

    • C. 

      Investment banking

    • D. 

      Money management

  • 2. 
    Which form of invested capital is subject to most of the firm's business and financial risk? 
    • A. 

      Debt capital

    • B. 

      Equity capital

    • C. 

      Borrowed capital

    • D. 

      Intellectual capital

  • 3. 
    Which of the following is not a true capital raising event for the firm?
    • A. 

      Primary market transaction.

    • B. 

      Secondary market transaction.

    • C. 

      Initial public offering.

    • D. 

      A corporate loan from a bank.

  • 4. 
    The ultimate owner(s) of an ongoing corporation are
    • A. 

      The federal government.

    • B. 

      The debt holders.

    • C. 

      The equity holders.

    • D. 

      The executive staff of the corporation.

  • 5. 
    Agency costs refer to
    • A. 

      The costs associated with managing the demands of federal agencies.

    • B. 

      The costs involved when converting an entity from a proprietorship to a corporation.

    • C. 

      The costs that arise due to conflicts of interest between shareholders and managers.

    • D. 

      None of the above.

  • 6. 
    Managers of firms should only take actions that
    • A. 

      Increase the value of the firm’s future cash flows.

    • B. 

      They expect will increase the firm’s share price.

    • C. 

      Have marginal benefits which are at least as great as the marginal cost of those actions.

    • D. 

      All of the above.

  • 7. 
    Which of the following is a strength of a sole proprietorship? 
    • A. 

      Unlimited life

    • B. 

      Easy to form

    • C. 

      Limited liability

    • D. 

      Limited access to capital

  • 8. 
    You were just hired as the CEO of a company. Your primary objective should be
    • A. 

      To maximize the company's earnings.

    • B. 

      To maximize profits.

    • C. 

      To maximize the company's price of common stock.

    • D. 

      To eliminate the company's competitors.

  • 9. 
    When is the return on assets equal to the return on equity?
    • A. 

      When the current ratio of the firm equals 1.

    • B. 

      When the firm issues equal amounts of long term debt and common stock.

    • C. 

      When the firm issues no dividends for a given time period.

    • D. 

      When the firm only issues equity to finance its borrowing.

  • 10. 
    A bond that grants the investor the right to exchange their bonds for common stock is called a
    • A. 

      Zero coupon bond.

    • B. 

      Treasury bond.

    • C. 

      Convertible bond.

    • D. 

      Mortgage bond

  • 11. 
    With respect to the company that has issued a callable bond
    • A. 

      The value of the call increases as the stock price increases.

    • B. 

      The value of the call increases as interest rates increase.

    • C. 

      The value of the call increases as interest rates decrease.

    • D. 

      None of the above.

  • 12. 
    The relationship between time to maturity and yield to maturity for bonds of equal risk is referred to as 
    • A. 

      The term structure of interests rates.

    • B. 

      The forward rate.

    • C. 

      The spot curve.

    • D. 

      The forward curve.

  • 13. 
    Which of the following securities poses the greatest financial risk for the investor?
    • A. 

      Common equity

    • B. 

      Preferred equity

    • C. 

      Debt

    • D. 

      Convertible death

  • 14. 
    Which of the following is an example of unsystematic risk?
    • A. 

      IBM posts lower than expected earnings.

    • B. 

      The Fed raises interest rates unexpectedly.

    • C. 

      The rate of inflation is higher than expected.

    • D. 

      None of the above.

  • 15. 
    What do you call the portion of your total return on a stock investment that is caused by an increase in the value of the stock? 
    • A. 

      Dividend yield

    • B. 

      Risk-free return

    • C. 

      Capital gain

    • D. 

      None of the above

  • 16. 
    What is the purpose of diversification?
    • A. 

      Maximize possible returns.

    • B. 

      Increase the risk of your portfolio.

    • C. 

      Lower the overall risk of your portfolio.

    • D. 

      None of the above.

  • 17. 
    Which statement is true regarding diversification? 
    • A. 

      The greater the systematic risk, the greater the return required by the investor.

    • B. 

      The greater the diversifiable risk, the greater the return required by the investor.

    • C. 

      We are able to remove all systematic risk if enough stocks are added to a portfolio.

    • D. 

      Systematic risk is diversifiable.

  • 18. 
    In the equation below, the number 100 represents? $75.13 = $100 / (1 + .1)3
    • A. 

      The present value a cash flow to be received at a later date.

    • B. 

      The future value a cash flow to be received at a later date.

    • C. 

      The discount rate for the future cash flow.

    • D. 

      The number of periods before the cash flow is to be received.

  • 19. 
    Suppose a professional sports team convinces a former player to come out of retirement and play for three seasons. They offer the player $2 million in year 1, $3 mil in year 2, and $4mil in year 3. Assuming end of year payments of the salary, how would we find the value of his contract today if the player has a discounted rate of 12%?
    • A. 

      PV= $2/1.12 + $3/1.12 + $4/1.12

    • B. 

      PV= $2 + $3/(1.12)^2 + $4/(1.12)^3

    • C. 

      PV= $2/(1.12) + $3/(1.12)^2 + $4/(1.12)^3

    • D. 

      PV= $2 + $3 + $4/ (1.12)^3

  • 20. 
    A 15 year, 8%, $1000 face value bond is currently trading at $958. The yield to maturity of this bond must be 
    • A. 

      Less than 8%

    • B. 

      Equal to 8%

    • C. 

      Greater than 8%

    • D. 

      Unknown

  • 21. 
    What is the equation to price Kramerica Stock?
    • A. 

      Po=$200/1.15 + $240/1.15 + $2.88/1.15 + $30.24/1.15

    • B. 

      Po=$2.40/(1.15) + $2.88/(1.15)^2 + $30.24/(1.15)^3

    • C. 

      Po=$2.00 + $2.40/(1.15) + $33.12/(1.15)^2

    • D. 

      Po= $2.40/(1.15) + $33.12/(1.15)^2

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