1) The Capital Asset Pricing Model ( CAPM) is used to calculate the cost of equity and to calculate the expected return on an equity but it is not used to determine if a stock is undervalued or overvalued. True False

2) The Security Market Line (SML) is a graphical representation of the Capital Asset Pricing Model. True False

3) Why do markets in emerging countries become segmented?

4) The beta in the CAPM formula measures the volatility of the stock but not the riskiness of the stock. True False

5) If the beta of Microsoft stock is 1.33, this means that this stock is riskier than the overall market whose beta is 1. True False

6) Aminata & Sons hurdle rate is 11.5%. Aminata is considering three projects with varying weighted average cost of capital (WACC). Project As WACC is 9.8%. Project Bs WACC is 11.7% while Project Cs WACC is 10%. Which two of these three projects will NOT get funded?

7) What is the characterization of emerging markets?

8) The capital structure of Jeety Corp is Debt 35%, Preferred stock is 15% & Common stock is 50%. The after tax cost of debt is 8%, for prefer stock it is 3% and that of common stock is 15%. Calculate the weighted average cost of capital for Jeety Corporation. The formula is WACC =WdKd + WpsKps + WcsKcs (Show your math calculation)

9) Calculate the expected return on Connex stock if the beta (B) is 1.25, the risk free rate (Rf) is 3% and the market return (Rm) is 8%? Formula: Er = Rf + B(Rm Rf)

10) A German national, Federich Hans, has opened a $10.5 million dollar Mercedes Benz auto dealership in Monrovia to service the entire Mano River Union area.

A) Hans is considered a genuine domestic investor. True False

B) List at least four issues that Hans considered prior to making his final investment decision.

C) Hans did not raise the $10.5 million dollars for his investment in the Liberian capital market. Why not?

D)Hans is worried about the success of his company given that his West African customers do not speak the German language. Hans worries are justified. True False

11) Multinational Enterprises (MNE) exist to take advantage of imperfections in national markets for products, factors of production, and financial assets. True False

12) International Corporate Finance is the financial aspects of multinational corporation operating within an international environment that takes into consideration direct foreign investment, foreign exchange regulations, currency rates, currency derivatives, interest rates, capital markets, etc. True False

13) The growth of a new kind of limit or impediment to financial globalization has resulted into the growth of financial inefficiency and the segmentation of globalization outcomes. True False

14) IN 2010, the international accounting firm Ernst & Young wrote a report that identified the ten (10) top risks that are confronted by international businesses. List any five of these risks.

15) The 20012002 Argentine Economic Crisis, the 20072009 Global Financial Crisis, the 2014 Russian Financial Crisis and the Greek Financial Crisis (2009 2016); all these international financial crises could have been prevented by the International Monetary System. True False

16) What has been the result of the global integration of capital markets.?

17) If a firm is located in a country with illiquid and/or segmented capital markets, how can it can achieve lower global cost and availability of capital?

18) Firms that are resident in industrial countries with small capital markets, from where do they source their long term debt and equity?

19) Futures contracts are traded on an organized exchange. One such exchange is the Chicago Mercantile Exchange. True False

20) List the four primary terms of a foreign exchange (FX) option. A________________, B_____________________, C__________________

D____________________________

21) What is the Capital Asset Pricing Model?

22) Warren Buffet used the CAPM formula and calculated the expected return on Amazon stock to be 15%. But when he researched the actual performance of the stock, it showed a return of 79%. Is the Amazon stock overvalued or undervalued?

23) The international CAPM helps determine the return investors expect for a given level of risk, including foreign risks associated with different currencies True False

24) Boulevard Palace Hotel Corp (BPHC) wants to build a new hotel in Ganta City, Nimba county. It will cost $600 thousand U S dollars. The Board of Directors (BOD) of BPHC has established the following capital structure for the company. 30%, debt, 12% preferred stock and 58% Common stock. The Managing Director of BPHC, Mr. Bullskull ordered the CFO, Mrs. Barbara Doe to raise $300,000 of the needed $600 000 from the banks. (1) Is Mr. Bullskulls job in Hot Water? Yes NO. If yes, why is his job in Hot Water? (2) Is Mrs. Barbara Doe compelled to follow the directives of Mr. Bullskull? Yes NO If no, why?

25) In financial capital markets, there are two types of risks. Systemic risk and un-systemic risk. Which of these risk that is not of concern to the CAPM formula? Why is the CAPM calculation not concern about the other risk?