BMAL Finance Exam Actual Questions and Answers 100% Correct
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Course
BMAL Finance
Institution
BMAL Finance
BMAL Finance Exam Actual Questions and Answers 100% Correct
Which of the following statements is most correct? - Answer- I feel the maturity risk premium were zero and the rate of inflation were expected to increase in the future, then the yield curve for U.S. Treasury securities would, other thi...
BMAL Finance Exam Actual
Questions and Answers 100%
Correct
Which of the following statements is most correct? - Answer- I feel the maturity risk
premium were zero and the rate of inflation were expected to increase in the future,
then the yield curve for U.S. Treasury securities would, other things held constant, have
an upward slope
Which don the following statements Ian correct? - Answer- Reinvestment rate risk is
lower, other things held constant, on long term than on short term bonds
Which of the following ins not one of the fundamental factors that affect the cost of
money? - Answer- Exchange rate
Most experts think that in the United States the real risk free rate fluctuates between -
Answer- Two to four percent
Which don thw following assets is the most liquid - Answer- Cash
During recessions the demand for funds typically - Answer- Decreases
As the demand for funds increase, the demand curve will shift to the ___ resulting in
___ market clearing interest rate - Answer- Right; higher
The ___ premium is compensation for possibility that the borrower will not be able to
pay the debt's interest and principal on time - Answer- Default risk
When a project's NPV exceeds zero - Answer- The project should be accepted without
any further consideration, assuming we are confident that the cash flows and the
required rate of return have been properly estimated
The underlying cause of ranking conflicts between NOV and IRR methods is differing -
Answer- Reinvestment rate assumption
, Which of the following statements isn't correct? - Answer- The NPV method assumes
that cash flows will be reinvested at the required rate of return while the IRR method
assumes reinvestment at the IRR
Which of the following is most correct? - Answer- Sunk costs should be ignored in
capital budgeting
Which of the following statements is correct? - Answer- The incremental operating cash
flow for capital budgeting includes return on invested capital, which is net income, and
return of part of invested capital, which is depreciation
Which of the following statements is correct? - Answer- In estimating incremental
operating cash flows for the purpose of capital budgeting, interest payments should not
be included since the effects of these payments are already included in the rate of
return the firm is required to earn from its investments.
A firm is considering the purchase of an asset whose risk is greater than the current risk
of the firm, based on any method for assessing risk. In evaluating this asset, the
decision maker should - Answer- Increase the required rate of return use le to evaluate
the project to reflect the higher risk of the project.
Which of the following statements is correct? - Answer- The NPV and IRR methods use
the same basic equation, but in the NOV method the discount rate isn't specified and
the equation is solved for NPV, while in the IRR method the NPV is set equal to zero
and the discount rate is found.
Which of the following statements is correct? - Answer- Large costs occur at the end of
nuclear power plants' lives because these plants have to be closed down, and shutdown
costs are high due to the difficulty of handling radioactive materials. For thins reason, it
is possible that a nuclear plant project could have two IRRs.
Which of the following rules are essential to successful cash flow estimates, and
ultimately, to successful capital budgeting? - Answer- Only incremental cash flows are
relevant to the accept/reject decision
Which of the following methods involves calculating an average beta for firms in a
similar business and then applying that beta to determine the the beta odnits own
project? - Answer- Pure play method
Which of the following statements is correct? - Answer- All of the above is correct
___ are decisions about whether to purchase capital projects and add them to existing
assets so as to increase existing operations - Answer- Expansion decisions
___ projects are a set of projects where the acceptance of one project means that other
projects can't be accepted - Answer- Mutually exclusive
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