Question

1. Which of the following is an advantage of a corporation (as a business structure)?

   	A	Easier to expand.
   	B	Easier to raise capital.
   	C	Enhances perceived credibility and/or stability of the business.
   	D	All of the above.

5 points   

QUESTION 2

1. Which of the following is an example of a capital structure decision?

   A		Westpac has decided to structure its employment agreements with management to increase the long-term incentive component of executive remuneration.
   B		Commonwealth Bank has decided to structure its mortgage portfolio in a way that minimises the risk of loan defaults.
   C		NAB had decided to invest capital in a new online payment system that allows immediate real-time transfer of funds between individual accounts.
   D		ANZ Bank has offered existing shareholders the right to purchase new shares directly from the company

5 points   

QUESTION 3

1. Which of the following events would be likely to cause the firm's share price to rise?

   A		Management had forecasted profit of $1 million, but actual profit was $2 million.
   B		It was reported in the news today that the firm was being sued for negligence.
   C		Management had forecasted profit of $1 million, but actual profit was $500,000.
   D		Last year's profit was $500,000 and this year's profit was exactly what management had forecast, $1 million.

5 points   

QUESTION 4

1. A person buying a share must think that ...

   A		the share is under- or accurately valued in the market
   B		the firm is about to announce a drop in revenue
   C		debt is riskier than equity
   D		the share is overvalued in the market

5 points   

QUESTION 5

1. You have just sold asset for $8,000. If you bought the asset one year ago and earned a return of 10%, what did the asset cost you?

   A		7665
   B		7273
   C		7200
   D		8800

5 points   

QUESTION 6

1. When your nephew was born, you put $1,000 into a bank account to help him save for his education. The bank account pays 6%p.a. compounded annually. How old will your nephew be when the account balance reaches $2,500?

   	A	11.9 years
   	B	15.7 years
   	C	14.4 years
   	D	25.0 years

5 points   

QUESTION 7

1. When my niece was born, I decided to save $10 for her every week to help fund her studies. My savings account pays a rate of 1.65% p.a.,compounded weekly. How much will I have saved when she turns 18 years old? (assume my first payment was at the end of the first week).
   What is the FV?

   	A	8096.90
   	B	10,896.42
   	C	2.72 million

5 points   

QUESTION 8

1. You plan to buy a fishing boat when you retire in exactly 10 years. You will need $15,000 to buy the boat. You want to deposit a constant amount each quarter (starting at the end of the first quarter) into a bank account that pays 4.8%p.a. compounded quarterly. How much does each quarterly payment need to be?

   A		$300.94
   B		$294.38
   C		$357.82
   D		$474.38

5 points   

QUESTION 9

1. Which of the following is NOT a characteristic of equity?

   A		Dividend payments are at the discretion of the board of directors.
   B		There is no maturity date.
   C		Shareholders are paid last and receive whatever is left after paying operating expenses and debt holders.
   D		Dividend payments are fixed and do not change year to year.

5 points   

QUESTION 10

1. JKL Ltd bonds have exactly 20 years remaining until they mature. The bonds have a face value of $10,000 and pay semi-annual coupons at a rate of 6.8%p.a. If the current market yield for these bonds is 5.3%p.a., what is the current price of JKL Ltd bonds. (all interest rates in this problem are quoted as APRs with semi-annual compounding).

   	A	$11,822.68
   	B	$8,385.89
   	C	$11,836.03
   	D	$8,373.23

Answer 1

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