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Financial Management Final University of Iowa Question and answers verified to pass 2024

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Financial Management Final University of Iowa Question and answers verified to pass 2024 Financial Management Final University of Iowa What is the world's largest (in terms of market capitalization) stock exchange? - correct answer NYSE True or False: The DJIA (Dow Jones Industrial Average...

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  • August 30, 2024
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  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • financial management final university of iowa
  • financial management final university of iowa ques

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Financial Management Final University
of Iowa
What is the world's largest (in terms of market capitalization) stock exchange?
- correct answer ✔NYSE


True or False: The DJIA (Dow Jones Industrial Average) more completely
characterizes the set of stocks in the U.S. than the Wilshere 5000 index. -
correct answer ✔False


When a firm earns income (i.e. has positive earnings), what can it do with that
income? - correct answer ✔a) Pay it out as dividends
b) Retain it within the firm, to (perhaps) use for more investment


When a firm invests in a new opportunity, if the return on that investment is
5% while the discount rate (required return) is 10%, then the investment has a
______ NPV. - correct answer ✔Negative


What happens to stock price when a firm invests in a positive NPV project (i.e.
a project with return on investment that exceeds the discount rate)? - correct
answer ✔Stock price rises


P/E ratios are ______________ in the anticipated constant growth rate (g) for
a constant growth stock. In other words, if investors revise their expectations
so that "g" is higher for a stock than it used to be, the stock price should
____________. - correct answer ✔Increasing, rise


A risk averse investor requires a _________ expected return to compensate
them for more risk. - correct answer ✔Higher

, Historically, small stocks have __________ average returns than large stocks.
- correct answer ✔Higher


Historically, stocks have _________ average returns than bonds (either
corporate or Treasuries). - correct answer ✔Higher


True or False: the average of two stocks' individual variances always equals
the variance of the portfolio combining those two stocks - correct answer
✔False


If you hold many stocks in a portfolio, the risk of that portfolio depends ______
on the covariance between the stocks in the portfolio, then it depends on the
individual stocks' variances. - correct answer ✔More


In the CAPM, the measure of (number of units of) risk is called ___________.
- correct answer ✔Beta


A stock is said to be ___________ under the following circumstance: the
stock has a higher required return (according to the CAPM), than the return an
investor could earn by paying the current stock price [and experiencing the
cash flows that ownership of the stock produces]. - correct answer ✔Over-
valued


True or False: the beta of a portfolio is the weighted average of the betas of
the individual stocks in that portfolio. - correct answer ✔True


A firm is all-equity (it has no debt and no preferred stock). The weights of
debt, equity and preferred [IN THAT ORDER] in the WACC are: - correct
answer ✔0.0, 1.0, 0.0

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