1. Which of the following investment strategies is appropriate for you?
a. Only invest in US stocks or US mutual funds.
b. Only invest in foreign stocks or foreign mutual funds.
c. Invest in both US and foreign stocks or mutual funds.
d. None of the above.
2. If your investment horizon is long, which of the following investments is LEAST appropriate for you?
a. Corporate bonds
b. Savings accounts
c. Common stocks
d. Mutual funds
Questions 3-8 are based on the following information. Corporate finance. You are the CFO of the Stocks-and-bonds company. Both your company’s stock and bonds are traded in the NYSE.
3. If you think your company’s stock is currently undervalued by the market, you would like to _____.
a. issue more shares. b. buyback some shares. c. issue more bonds. d. call back your company’s old bonds and issue new bonds.
4. Another company also thinks your company’s stock is currently undervalued by the market. So, it wants to buy a large number of your company’s shares to control your firm. If you want to defend the takeover, you would _____.
a. issue more shares. b. buyback some shares. c. lay off your company’s employees. d. call back your company’s old bonds and issue new bonds.
5. If you think your company’s stock is now substantially overvalued by the market, you would like to _____.
a. issue more shares. b. buyback some shares. c. issue more bonds. d. call back your company’s old bonds and issue new bonds.
6. If you think your company’s stock is now substantially overvalued by the market and you want to acquire another company, which you think is undervalued by the market, you would ______ to control the target company.
a. pay cash to retire the target company’s debt b. buy the target company’s bonds c. pay cash to buy the target company’s shares d. exchange your company’s shares for the target company’s shares
7. Your company wants to acquire another company. After you announce the merger intention to the public, the target company’s stock price would _____.
a. decrease. b. increase. c. unchanged. d. none of the above.
8. You believe the market interest rate has already dropped to the bottom. You would _______.
a. issue more shares. b. buyback some shares. c. call back your company’s old bonds and issue new bonds. d. increase your company’s cash dividends.