1. The current exchange rate is 6.2968 yuan/$ and 0.7899 euro/$. Based on these exchange rates, the current euro/yuan exchange rate is

1.2544 euro/yuan

4.9738 euro/yuan

7.9716 euro/yuan

5.5069 euro/yuan

7.0867 euro/yuan

Question 2

You have the following information regarding your firm's financing:

Book Value of Bonds $1460

Book Value of Preferred $1490

Book Value of Common $2886

Market Value of Bonds $1359

Market Value of Preferred $1637

Market Value of Common $6399

After-Tax Cost of Debt 7.1%

Cost of Preferred 8.9%

Cost of Common 13.5%

Given this information, your firm's Cost of Capital is ____? (Round to 2 decimal places in percentage terms)

The Days Sales Outstanding ratio reflects how long it takes us on average to collect our sales. Since the sooner we receive cash flows, the more they are worth to us, a lower Days Sales Outstanding ratio is always better than a higher Days Sales Outstanding ratio

True

False

Question 4

Find the effective annual rate of 7.5% compounded monthly

7.50%

7.92%

7.62%

7.76%

8.07%

Question 5

The primary goal of finance is to maximize the shareholder wealth (or the value of the firm).

True

False

Question 6

You have gathered the following information about your firm:

Current Stock Price (Common) ==> $46

Forecasted Dividend (D1) ==> $2.66

Beta ==> 1.2

YTM on Debt ==> 7.57%

Coupon Rate on Debt ==> 6.08%

Treasury Bond Yield ==> 4.7%

Growth Rate on Dividends ==> 4.5%

Expected Return on the Market ==> 10.33%

Risk Premium for Stocks over Bonds ==> 3.2%

Based on this, estimate the cost of common stock financing based on the dividend valuation approach. Round to 2 decimal places in percentage terms.

Question 7

All else equal, we would expect convertible bonds to have lower yields (interest rates) and callable bonds to have higher yields (interest rates).

True

False

Question 8

Firms can use spot rates of exchange to hedge their currency risk.

True

False

Question 9

Consider the following probability distribution

Probability Return

0.25 -20%

0.50 10%

0.25 36%

Calculate the standard deviation for this security.

None of the other answers are correct

29.33%

19.82%

24.58%

16.35%

Question 10

The current exchange rate is $1.252/euro. Last month, the exchange rate was $1.311/euro. This tells us that the US Dollar has strengthened relative to the Euro.

True

False