Question1: The market allocates capital to companies based on;
[A] Expected returns.
[B] Risk.
[C] Efficiency.
[D] All of the above
Question2: The purpose of secondary trading is to;
[A] Provide jobs for brokers and dealers.
[B] Provide liquidity and competition between investments.
[C] Provide a market for securities not handled in primary trading.
[D] Provide lower commissions than on the organized exchanges.
Question3: The payback method has several disadvantages, among them;
[A] Payback fails to choose the optimum or most economic solution to a capital budgeting problem
[B] Payback ignores cash inflows after the payback period
[C] A &B
[D] None of the above
Question4: A higher interest rate [discount value] would;
[A] Reduce the price of common stock.
[B] Reduce the price of corporate bonds.
[C] Reduce the price of preferred stock.
[D] All of the above.
Question5: The risk premium is likely to be highest for;
[A] United State government bonds
[B] Corporate bonds
[D] Gold mining expedition
[E] Either B or C