Corporate Finance Questions and Correct Answers & Latest Updated
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Course
Corporate Finance
Institution
Corporate Finance
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...
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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