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NEW QUESTION 548
Equilibrium quantity in markets characterized by oligopoly is
- A. higher than in monopoly markets and higher than in perfectly competitive markets.
- B. higher than in monopoly markets and lower than in perfectly competitive markets.
- C. lower than in monopoly markets and higher than in perfectly competitive markets.
Answer: B
Explanation:
The price is lower than in monopoly markets but higher than in perfectly competitive markets.
NEW QUESTION 549
Suppose a U.S. firm buys good from Thailand with a payment of Thai Baht 2,000,000 due in 90 days.
The current price of the baht is U.S. 0.02532. The U.S. firm wishes to hedge its currency risk by entering into a 90 day forward contract with a bank at a price of $0.02545. In 90 days the spot rate for Thai baht is
$ 0.02528.
- A. The firm can choose not to fulfill the contract because the spot rate at the time baht payment is due is less than the forward contract price.
- B. This means the firm will pay the bank $50,900 to fulfill its part of the forward contract.
- C. This means the firm will pay the bank $50,560 to fulfill its part of the forward contract.
Answer: B
Explanation:
The firm pays the bank the price agreed on in the forward contract: 0.02545 x 2,000,000 or
$ 50,900. The firm experiences a loss on the contract because the forward price is greater than the spot rate at the time the baht payment must be made. If it had paid at the spot rate at the time the money was due, it would only have paid 2,000,000 x 0.02528 = $50,560.
NEW QUESTION 550
In the presence of a risk-free security, the efficient frontier
- A. changes and is replaced by a straight line.
- B. consisting of risky assets moves down parallel to itself.
- C. consisting of risky assets moves up parallel to itself.
Answer: A
Explanation:
In the presence of a risky asset, the efficient frontier of risky assets is dominated by a new efficient frontier consisting of the risk-free security and the tangent portfolio found by joining the risk-free security with a point on the efficient frontier of risky securities where the line has the highest slope.
NEW QUESTION 551
We would like to refer all probability statements to one set of normal probability values. The distribution hat fills this role is known as the
- A. standard normal distribution.
- B. continuous uniform distribution.
- C. binomial distribution.
Answer: A
Explanation:
We would like to refer all probability statements to one set of normal probability values. The distribution hat fills this role is known as the standard normal distribution.
NEW QUESTION 552
The _____ is the period of time required for the firm to acquire inventory, sell the finished goods, and collect the proceeds.
- A. inventory period.
- B. operating cycle.
- C. cash cycle.
Answer: B
Explanation:
A). This period is not affected by the amount of time it takes to collect on a receivable.
C). This period measures the time it takes for cash to flow in once it has flowed out of the firm.
NEW QUESTION 553
A survey of 144 retail stores revealed that a particular brand and model of a VCR retails for $375 with a standard deviation of $20. If 90% and 95% confidence intervals are developed to estimate the true cost of the VCR, what similarities would they have?
- A. Point estimates
- B. Both point estimates and standard errors
- C. Standard errors
Answer: B
Explanation:
The point estimates and the standard errors will be the same. The z-values will differ according to the area under the curve.
NEW QUESTION 554
Jorgensen Products has just issued 25,000,000 in 4.50% annual coupon bonds at a market yield of
4 .80%. The bonds have a maturity of 8 years. What adjustments would an analyst make to the CFF at the end of the first year?
- A. Increase by 51,543
- B. Decrease by 51,543
- C. Decrease by 488,681
Answer: A
Explanation:
Proceeds of bond issue: PMT = 1,125,000; I/Y = 4.80; FV = 25,000,000; N = 8; CPT PV =
2 4,511,316 Jorgensen will recognize this as a liability. Its annual interest will be, interest = 0.048 x
2 4,511,316 = 1,176,543 Jorgensen records a CFO of -1,125,000 based on the coupon payment. The analyst would reduce the CFO by 51,543 to reflect the higher interest cost (= 1,176,543 - 1,125,000).The
CFF would have to be increased by the same amount, 51,543, to reflect the fact that this differential interest is owed and will be paid at maturity. Thus, CFF will have to be increased by 51,543.
NEW QUESTION 555
WePay, Inc. made the following dividend declaration:
"The Board of Directors of WePay, Inc. has declared a regular quarterly dividend of $0.25 per share payable June 13, 2001 (a Wednesday) to all stockholders-of-record as of the close of business on May 17,
2 001 (a Thursday)."
Assuming a three day settlement for WePay stock and no holidays in the weeks surrounding the record and payment dates, determine the ex-dividend date.
- A. Monday May 14, 2001
- B. Tuesday May 15, 2001
- C. Monday June 11, 2001
Answer: B
Explanation:
With a three day settlement, the ex-dividend date would be two days prior to the holder-of-record date, which would be Tuesday May 15, 2001. If an investor bought WePay on Monday
May 12, 2001, they would settle for it on Thursday May17, 2001 and would be the holder-of-record at the close of trading on that date. Hence they would receive the dividend. Alternatively, if they bought it on
Tuesday May 15, 2001, they would settle on Friday May 18, 2001 which is the day after the holder-of-record date. Hence they would not receive the dividend.
NEW QUESTION 556
The current price of Company X's common shares is $50. Its estimated P/E ratio is 25x. If the company borrows funds to finance a stock repurchase at its after-tax cost of capital of 6%, its EPS will:
- A. decrease first, then increase gradually in future years.
- B. increase.
- C. decrease.
Answer: C
Explanation:
Since the earnings yield is 1/25 = 4%, which lower than its after-tax cost of financing, earnings dilution will result from the buyback.
NEW QUESTION 557
You plan to buy a common stock and hold it for one year. You expect to receive both $1.50 in dividends and $26 from the sale of stock at the end of the year. If you wanted to earn a 15% return, the maximum price you would pay for the stock today is:
- A. $24.50
- B. $22.61
- C. $23.91
Answer: C
NEW QUESTION 558
An upward-sloping short-run marginal cost curve shows that:
- A. with a fixed amount of labor, as more and more capital is added, output increases at a decreasing rate, and thus each unit is more expensive than the previous unit.
- B. with a fixed amount of capital, as more and more labor is added, output decreases, and thus marginal cost increases.
- C. with a fixed amount of capital, as more and more labor is added, output increases at a decreasing rate, and thus each unit is more expensive than the previous unit.
Answer: C
Explanation:
In the short run, capital is assumed fixed. As more labor is added, output will increase, but due to diminishing returns, it will increase at a decreasing rate. Thus the next worker costs the same amount but adds less to production, increasing the marginal cost of the last unit, and resulting in an upward-sloping marginal cost curve.
NEW QUESTION 559
Vickery, a trustee for the pension plan of Richardson Industries, has just received a commission schedule from XYZ Brokerage, a firm with which he is not currently trading. The fee schedule is lower than that charged by ABC Brokerage, the firm Vickery now uses for most transactions. ABC also provides research data and performance measurement for the pension plan, services which XYZ is not equipped to handle. Vickery is concerned that he may be violating his fiduciary duty of loyalty by not using the lowest cost brokerage firm. Which one of the following statements is true?
- A. Vickery will violate his fiduciary duty unless he immediately transfers his entire business to XYZ.
- B. Vickery can continue to trade through ABC if he determines, in good faith, that the value of the services are commensurate with the cost.
- C. Vickery will not violate his fiduciary duty unless he personally profits from his relationship with ABC
Answer: B
NEW QUESTION 560
Economic profit is
- A. total revenue minus explicit costs.
- B. total revenue minus the total of explicit and implicit costs.
- C. total revenue minus implicit costs.
Answer: B
Explanation:
Economic profit is total revenue minus the sum of explicit and implicit costs. Thus, when economic profit is zero, firms still receive a profit to cover their implicit costs.
NEW QUESTION 561
You have a portfolio of 4 stocks, A, B, C and D.
Exactly 25% of your capital is invested in each stock.
E(RA) = 15%, E(RB) = 12%, E (RC) = 10% and E(RD) = 8%. The expected return on the portfolio is:
- A. 11.25%.
- B. 10.75%.
- C. 12%.
Answer: A
Explanation:
0.25 x 15% + 0.25 x 12% + 0.25 x 10% + 0.25 x 8% = 11.25%.
NEW QUESTION 562
What monthly payment is required over the next 48 months to pay off a $10,000 debt today, if interest is charged at 14% per year, compounded monthly?
- A. $116.02
- B. $270.30
- C. $366.67
Answer: B
Explanation:
On the BAII Plus, press 48 N, 14 divide 12 = I/Y, 10000 PV, 0 FV, CPT PMT. On the HP12C, press 48 n, 14 ENTER 12 divide i, 10000 PV, 0 FV, PMT. Make sure the BAII Plus has the P/Y value set
48
to 1. Or Annuity = 10000 / {[1 - 1/(1+0.14/12) ]/(0.14/12) x (1 + 0.14/12)} = 270.30
NEW QUESTION 563
In terms of The Standards of Professional Conduct per Standard II (A) Material non-public information, which of the following information is considered to be material non-public?
I). A company plans on doubling its dividend.
II). A company is going to double its profits as stated by the Chairman at the beginning of the year.
III). An offer is going to be made for all the securities of the Company.
- A. I and II.
- B. I and III only.
- C. II and III.
Answer: B
Explanation:
A company is going to double its profits as stated by the Chairman at the beginning of the year is a material fact but is not non-public, since the Chairman has already stated that the company will double its profits in the coming year.
NEW QUESTION 564
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