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Corporate Finance Questions and Correct Answers & Latest Updated

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Which of the following portfolios have the least risk? A) Treasury Bill B) Portfolio of long-term US Government Bonds C) Portfolio of US common stocks D) Portfolio of AAA-rated corporate bonds o :## A) - Portfolio of Treasury Bills Generally, IPO's are: o :## Underpriced Which of the follow...

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  • August 25, 2024
  • 9
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

Subjects

  • corporate finance questions and correct answers

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  • Corporate Finance
  • Corporate Finance

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MASTER01

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1|Page: 2024/2025 Grade A+




Corporate Finance Questions and Correct
Answers & Latest Updated
Which of the following portfolios have the least risk?

A) Treasury Bill

B) Portfolio of long-term US Government Bonds

C) Portfolio of US common stocks

D) Portfolio of AAA-rated corporate bonds


o :## A) - Portfolio of Treasury Bills



Generally, IPO's are:


o :## Underpriced



Which of the following statements best describes shelf regulation?


o :## Registration of the sale of securities in the primary market



A new public entity issue from a company with public equity previously outstanding is

called:


o :## Seasoned Equity Offering (SEO)



When a company sells an entire issue of securities to a small group of institutional investors

like life insurance companies, pension funds, etc., it is called:


o :## Private Placement




Master01: DO NOT COPY AND PASTE!! August 25, 2024 Latest Update

, 2|Page: 2024/2025 Grade A+


Which of the following is NOT a sensible reason for a firm to rely on internal funds:


o :## A) Equity issues are generally expensive
B) A new bond issue may drive the firm's debt ratio too high

C) Financial markets interpret the issuance of equity unfavorably




If a bond is junior or subordinated, it:


o :## Must give preference to senior creditors in the event of default



An investor can create the effect of leverage on his/her account by:


o :## 1) Buying equity of an unlevered firm
2) Borrowing on his/her account




If an investor buys a portion (X) of the equity of a levered firm, then his/her payoff is:


o :## (X) * (profits-interest)



Capital structure is irrelevant if:


o :## 1) Capital markets are efficient
2) Each investor can borrow/lend on the same terms as the firm

3) There are no tax benefits to debt




MM Proposition II (assuming no bankruptcy) states:


o :## 1) The expected return on equity is positively related to leverage
2) The required return on equity is a linear function of the firm's debt to equity ratio




Master01: DO NOT COPY AND PASTE!! August 25, 2024 Latest Update

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