FIN 571 Wk 1 - Practice: Wk 1 Practice Questions

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FIN 571 Wk 1 - Practice: Wk 1 Practice Questions

In which type of organizational structure is the agency problem least likely to exist?

Multiple Choice

Limited Liability Corporation

Partnership

Professional Corporation

Sole Proprietorship

Which of the following is NOT a claim on the assets of a company?

Multiple Choice

Bond

Patent

Promissory Note

Stock

Which one of these determines the minimum acceptable rate of return on a capital investment?

Multiple Choice

•      The alternative investment opportunities available to investors
•      The profit margin of the existing firm
•      The rate of return on the firm's outstanding shares
•      The rate of return on risk-free debt securities

You purchased a 6% annual coupon bond at face value and sold it one year later for $1,015.16. What was your rate of return on this investment if the face value at maturity was $1,000?

Multiple Choice

•      4.48%
•      6.15%
•      7.52%
•      6.07%

What are the conditions imposed on a debt issuer that are designed to protect bondholders ?

Multiple Choice

•      Collateral agreements
•      Vanilla wrappers
•      Protective covenants
•      Default provisions

What is the total return to an investor who buys a bond for $1,100 when the bond has a 9% annual coupon and 5 years until maturity, then sells the bond after 1 year for $1,085?

Multiple Choice

•      6.82%
•      6.91%
•      7.64%
•      9.00%