Fin 133 Practice Final Exam
Fin 133 Practice Final Exam
Fin 133 Practice Final Exam
Section 9
Final Examination, Spring 2003
_____ 2. Jacobs and Company has warrants outstanding, which are selling at a $3
premium above formula value. Each warrant allows its owner to purchase
one share of common stock at $25. If the common stock currently sells for
$28, what is the warrant price?
A) $6
B) $3
C) $12
D) $14
_____ 10. Financial instruments in the capital markets generally fall under what category
in the Balance Sheet?
A) Short-term liabilities and equities
B) Long-term liabilities and equities
C) Near cash assets
D) None of the above.
_____ 11. If one project has a higher standard deviation than another
A) it has a greater risk
B) it has a higher expected value
C) it has more possible outcomes
D) it may be riskier, but this can only be determined by the coefficient of
variation.
_____ 14. If three investment alternatives all have some degree of risk and different
expected returns, which of the following measures could best be used to rank
the risk levels of the projects?
A) Coefficient of correlation
B) Coefficient of variation
C) Standard deviation of returns
D) Net present value
_____ 15. Security markets are efficient when each of the following exist except
A) security prices follow the leading indicators such as the DJIA very closely
B) the markets can absorb large dollar amounts of stock without destabilizing
the price.
C) Prices adjust rapidly to new information
D) There is a continuous market where each successive trade is made at a
price close to the previous trade.
_____ 16. The investment banker’s function involves all of the following except
A) take a portion of the risk in the distribution of an issue
B) always insure a company a given amount of equity can be sold so that
long-range financial planning can be made accurately.
C) Make a market by buying and selling a security in insure a liquid market
D) Contract to buy securities from the corporation and resell them to other
security dealers and the public.
_____ 23. The document that outlines the covenants and duties existing between
bondholders and the issuing corporation is called
A) an indenture
B) a debenture
C) secured debt
D) protective covenants
_____ 29. The interest rate on convertibles is generally __?__ the interest rate on similar
\ nonconvertible instruments.
A) greater than
B) less than
C) the same as
D) at least twice
A stock sells for $45 rights-on, the subscription price is $41. Seven rights are required to
purchase one share. What is the value of each right?
Problem:
5 points
Given that there are 4,000,000 shares outstanding in a corporation, how many shares will
be required for a minority group of stockholders to elect 3 of the 11 members on the
board of directors? (Assume cumulative voting required).
Problem:
10 points
.15 $ 60,000
.25 85,000
.45 110,000
.15 130,000
What is the expected value of the cash flows for this project?
Problem:
20 points:
Bill Broodiest, star quarterback for the Spring Bay Smashers, would like to invest a small
portion of his earnings in the stock of one of a few firms. His estimates of dividends and
the probabilities of their occurrence follow:
.2 $ 0 .1 $ 500
.4 700 .2 700
.4 800 .4 900
.2 900 .2 1,100
.1 1,200
B) 12 points: What is the standard deviation and coefficient of variation for each?