Section A Multiple choice questions AII 15 Questions are compulsery and must be attempted. Each question is worth 2 marks. 1. Which of the following is most appropriate as an objective of a not-for-profit organisation? A To achieve long temn growth in eamings B To maximise shareholder wealth C To make efficient use of resoarces D To minimise input eosts (2 marks) 2. Smith Co has just paid a dividend of 21 pence per share and its share price one year ago was f3.10 per share. The total sharcholder return for the year was 19.7%. What is the current share price? ABCDE3.303.71E3.31E3.35 (2 marks) 3. Which of the following statements are correet? 1. Maximising market share is an example of a financial objective 2 Sharebolder wealth maximisation is the primary financial objective for a company listed on a stock exchange 3 Financial objectives should be quantitative so that their achievement can be measured A 1 and 2 only B 1 and 3 only C 2 and 3 only D 1,2 and 3 (2 marks) 4. Which of the following is NOT an advantage of withholding a dividend as a source of finance? A Retained profits are a free source of finance B Investment plans need less justification C Issue costs are lower D It is quick- (2 marks) 5. Rank the following from highest risk to lowest risk from the investor's perspective. Preference share 234ABCDTreasurybiCorporatebooOrdinarysh1,4,3,21,4,2,34,2,1,34,1,3,2 6. Which of the following statements about net present value (NPV) and internal rate of refurn (IRR) is accurate? A Two NPV calcalations are needed to estimate the tRR using linear isterpolation. B The graphical apposoch to IRR is only an estimate, linear interpolation esing the formula is required for a precise answer. C The IRR is anique. D An IRR graph with NPV on the Y 'axis and diucount rate on the ' X axis aill have a negative slope. (2 maiks) 7. Which one of the following is issued at a discount to its redemption value and pays its holder no interest during its life? A A deep discount bond B A long-lerm bond issued by the government C An ansecured loan note D A zero coupon bond (2 marks) 8. Which of the below best deseribes the signalling effect of dividend policy/announcements? A It indicates fiture dividend patterns. B A dividend that is different from investor expectations highlights information ahout the business to the investors. C It flages reported financial results to follow. D It indicates poor cash flow health. (2 marks) 9. Which TWO of the following are true? I Under weak form hypothesis of market efficiency, share prices reflect all available information about past changes in share price 2. If a stock market displays sema-strong efficiency thon individuals can beat the market 3 Behavioural finance aims to explain the implications of psychological factors on investor decisions 4 Random walk theory is based on the idea that past share price patterna will be repeated A 1 and 2 . (2 marks) 10. A company has jast paid an ordinary share dividend of 32.0 pence and is expected to pay a dividend of 33.6 pence in one year's time. The company has a cest of equity of 13%. What is the marlet price of the company's shares to the nearest pence on an exdividend basis? ABCDE3.20E4.41$2.5984.2 (2 maks) 11. Identify which of the following are company's stakeholders: A. Employees: B. Shareholders; C. Croditors; D. All of the above; 12. The additional return that investor will get by investing in risky assets is called: A. Rlisk aversion: B. Risk premaium; C. Profit margin: D. None of the above. (2 marks) 13. The covariance between the return on the market inder and the return on the security divided by the variance of the return on the market index is called: A. Beta coefficient: B. Risk premium: C. Standard Deviation: D. Volatility. (2 marks) 14. Which of the following describes standard deviation: A. The variasce of the returs on the security divided by the variance of the return on the market index; B. The square root of the sum of squared deviations from the mean, multiplied by probability C. The covariance between the return on the market index and the return on the security divided by the variance of the return on the market index. D. None of the above
