Finance Questions

__________ costs incurred for inventory are product costs and are recorded as part of the inventory asset account.

Return on Investment is the _______ company expects from investing

_________ ROI indicates better performance

There will be no ______ cost variances associated with static versus flexible budgets because total _____ cost is not affected by the level of activity.

Fixed Cost are _____ _____ at all units in both flexible budgets and the master (static) budget

Investments in capital assets can only be recovered by using ______

You can identify the most appropriate cost driver by making sure it _------

When allocating for joint cost it is better to do it based on _______

______ and ______ are NOT considered to be PRODUCT COSTS for financial reporting purposes, but they ARE considered in the COST-PLUS pricing decision

Which statements about beta as a measure of risk and variance as a measure of risk are correct?Beta is a measure of market risk and is useful in the context of a well-diversified portfolio.Beta measures the sensitivity of the security returns to changes in market returns.The market portfolio has a beta of one.The market portfolio has a beta of zero.Variance measures the total risk of a security and is a measure of market risk.Total risk of a security consists of unique risk and idiosyncratic risk.In a well-diversified portfolio, unique risks tend to cancel each other out and only diversifiable risk remains.

Assume stock prices follow a random walk. Then this implies that:Successive price changes are independent of each otherPrice changes cannot be predictedSuccessive price changes are positively relatedSuccessive price changes are negatively relatedThe autocorrelation coefficient is either + 1 or -1

Assume, starting from an empty set, you increase the number of stocks in a portfolio, by adding securities randomly. By doing this you also achieve the following:

Given the following data for a stock: beta = 1.9; risk-free rate = 4%; market rate of return = 14%; and Expected rate of return on the stock = 13%. Then the stock is:

Your total wealth is currently 1000EUR. You invest 1500EUR in the market portfolio. Assume the CAPM. Select the statement that applies.You are short the market portfolioYou are long the risk-free rateYou are borrowing at the risk-free rateYou are lending at the risk-free rate

AAA Company is financed entirely by common stock that is priced to offer a 15 percent expected return. The common stock price is USD 40 per share. The earnings per share (EPS) is expected to be USD 6. If the company repurchases 25 percent of the common stock and substitutes an equal value of debt yielding 6 percent, what is the expected value of earnings per share after refinancing? (Ignore taxes.)

XYZ Inc needs to raise $25 million to fund a new office complex. The company plans on issuing ten-year bonds with a face value of $1000 and a coupon rate of 7.0% (annual payments). YTM = 6.8%the number of bonds that XYZ must issue to raise the needed $25 million is closest to:

the AAA Company has a debt to total value ratio of 0.5. The cost of debt is 8 percent and that of unlevered equity is 12 percent. Which statements are correct?the weighted average cost of capital is 12 percent if the tax rate is 30 percentThe weighted average cost of capital is 14.8 percent if the tax rate is 30 percent.The return on assets is 16 percentThe return on assets is 12 percentThe weighted average cost of capital is 12 percent if the tax rate is 30 percent

How can one invest today at the forward rate that applies to the period that starts one year from today to two years from today? That is, the forward rate from year t=1 to t=2?By providing a loan that starts in one year and is repaid in two yearsBy buying a 2-year bond and selling a 1-year bond with the same couponBy buying a 1-year bond and then after a year reinvesting in a further 1-year bondBy providing a loan that starts today and is repaid in two yearsBy buying a 1-year bond and selling a 2-year bond with the same coupon

If the average annual rate of return for common stocks is 0.061, and for treasury bills it is 0.036, what is the market risk premium?

You observe the following spot prices for zero coupon bonds: price for maturity one year: 0.95; price for maturity two years: 0.94; price for maturity three years: 0.93; price for maturity four years: 0.92; price for maturity five years: 0.91; How does the yield curve look like?