FIN 301 Review Exam Questions with 100% Correct Answers
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Course
FIN 301
Institution
FIN 301
Which of the following is an example of asset allocation? A.
A. Choosing how much to invest in energy companies vs. utility companies
B. Choosing how much to invest in stocks vs. bonds
C. Choosing how much to invest in Apple vs. Microsoft
D. None of the above - Answer-B
True or False: Bet...
FIN 301 Review Exam Questions with
100% Correct Answers
Which of the following is an example of asset allocation? A.
A. Choosing how much to invest in energy companies vs. utility companies
B. Choosing how much to invest in stocks vs. bonds
C. Choosing how much to invest in Apple vs. Microsoft
D. None of the above - Answer-B
True or False: Beta and expected return are not related at all.
True
False - Answer-False
Believers of behavioral finance principles do believe that
A. Markets are not always efficient
B. Rational expectations reflect expected outcomes
C. Choices are always based off expected utility maximization
D. Prices reflect risk and return
E. Arbitrageurs correct mispricings in the market - Answer-A
Given the following information, which stock has the highest return?
Which two financial metrics does Warren Buffet use to analyze companies?
A. Profit Margin & Return on Assets
B. Profit Margin & Return on Equity
C. Return on Equity & Return on Assets
D. Return on Assets & Return on Investment
E. Return on Equity & Return on Investment - Answer-B
The time value of money states that
A. A dollar today is worth more than a dollar tomorrow
B .A dollar today is worth less than a dollar tomorrow
C. A dollar today is worth exactly the same as a dollar tomorrow - Answer-A
True or False: A dollar today is worth less than a dollar tomorrow.
A. True
B. False - Answer-False
,The random walk hypothesis is inconsistent with the efficient market hypothesis
A. True
B. False - Answer-False
Which of the following determines a stock's price in the short-run:
A. The stock's earnings
B. Supply and Demand
C. Net Interest Margins
D. The SEC
E. Analysts on Wall Street who cover the stock - Answer-B
Financial theory is based upon the assumption that investors are always
A. Risk takers
B. Risk averse
C. Irrational - Answer-B
A healthcare company announces it has developed a new drug that will increase its
annual revenue by 5-10% over the next three years. According to the efficient market
hypothesis, the stock price will reflect this news
A. One year after the announcement
B. One month after the announcement
C. One week after the announcement
D. The day of the announcement
E. Never - Answer-D
According to the efficient market hypothesis, using technical analysis to forecast future
stock prices is
A. Extremely useful
B. Slightly useful
C. Useless - Answer-C
All else equal, which of the following stocks should have the highest expected return?
Stock A: Standard Deviation - 15%
Stock B: Standard Deviation - 30%
Stock C: Standard Deviation- 5%
A. Stock B
B. Stock A
C. Stock C - Answer-A
Which of the following is NOT true in regards to behavioral finance
A. It involves studying the effects of various factors on economic decision-making
,B. It examines the consequences of human decision making on market prices and
returns
C. It asserts that prices reflect emotions and biases
D. Economic decision makers make rational decisions that maximize expected utility
E. Behavioral models integrate insights from psychology, neuroscience, and
microeconomic theory - Answer-D
Apple's stock traded at $260 a year ago. If Apple's stock currently trades at $320 and
Apple paid a $10 per share dividend, what was the return on Apple's stock?
A. 26.9%
B. 23.1%
C. 18.8%
D. 21.8% - Answer-A
According to the Principles of Finance, risk aversion means:
A. An investor avoids risk at all cost
B. Investors takes small risks, but do not avoid risk at all cost
C. An investor prefers more risk to less risk in some investments
D. None of the Above - Answer-B
Company XYZ pays a $6 per share dividend. One year ago the price of the stock was
$83 and today the price is $70, what was the return on the stock?
A. -8.4%
B. -15.6%
C. 22.9%
D. 27.1% - Answer-A
Which of the following stocks is the safest? Stock A: Mean Return - 10%, Std. Deviation
- 10% | Stock B: Mean Return - 10%, Std. Deviation - 20%
A. Stock A
B. Stock B - Answer-A
Beta is used in the capital asset model primarily as a measure of
A. Profitability
B. Trading volume
C. Valuation
D. Earnings growth
E. Risk - Answer-E
Inflation decreases your return on investment by reducing the future value of the money
you receive on your investment
True
False - Answer-True
Over the past several decades to the 1960's, what is true regarding the financial
environment?
, A. The economy has been up and down but on average there is negative growth
B. There has been minimal growth while volatility was high
C. Growth has been high with only minor volatility
D. Growth and volatility have both been low
E. Growth and volatility have both been high - Answer-E
If a natural disaster hits a major oil producing region and inhibits global supply, what is
most likely to happen?
A. Oil prices will rise gradually since there is sufficient inventory to cover losses
B. There will likely be no observable impact in markets
C. Oil prices will reflect the lower supply immediately
D. Markets will react only after the impact on supply is determined, likely months later
E. There will be minimal impact on oil markets, but equity markets will react immediately
- Answer-C
Communication with markets is the responsibility of which role?
A. CEO
B. CFO
C. Treasurer
D. Controller
E. VP of Communications - Answer-B
True or False: Market Cap is equal to shareholder's equity
True
False - Answer-False
True or False: In addition to overseeing the functions of the Treasurer and Controller,
the CFO hedges risks and insures that capital is available to fund strategic plans.
True
False - Answer-True
Which of the following is an example of a long-term asset?
A. Cash
B. 1-year Treasury Bonds
C. Inventory
D. An iPod factory
E. Accounts receivable - Answer-D
Why is investing in long-term assets important?
A. It directly increases the company's market value
B. It will increase the efficiency of a firm in the short run
C. It allows companies to grow their revenue in the long run
D. It decreases a company's long-term liabilities
E. It increases a firm's free cash flow - Answer-C
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