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FINAN101-25A (HAM) - Introduction to Finance

FINAN101-25A (HAM) - Introduction to Finance

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Which one of the following statements is not true about brokered markets?

Brokers bring buyers and sellers together to earn a fee, called a commission.

Brokers can guarantee an order because they have an inventory of securities.

Investors have an incentive to hire a broker because they charge a commission that is less than the cost of direct search.

Brokers' extensive contacts provide them with a pool of price information that individual investors could not economically duplicate themselves.

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Within a portfolio, diversification leads to the reduction of:

None of the above.

firm-specific and market risk.

firm-specific risk.

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A security is worth buying when its:

price-earnings ratio is negative.

intrinsic value is greater than its market price.

book value is greater than its market price.

dividend growth rate is positive.

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Which one of the following statements is true about ordinary shares?

Owners of ordinary shares have the lowest-priority claim on the company's assets in the event of insolvency.

Ordinary shareholders have unlimited liability.

Owners of ordinary shares are guaranteed dividend payment by the company.

Ordinary Shares are considered to have a fixed maturity.

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The value of a common stock today depends on:

the number of authorised shares

the expected future common earnings per share.

the industry analysts.

the expected future dividends and the discount rate.

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Under the mixed growth dividend model, the assumption is:

a firm experiences a mix of constant and non-constant dividend payments (dollar amounts).

none of the above.

a firm experiences a mix of constant and non-constant growth in dividend payments.

a firm experiences non-constant growth in dividend payments.

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Bond issuance costs include:

all of the above.

accountant fees.

investment banking fees.

legal fees.

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One of the drawbacks of the payback period is that

it considers the time value of money

none of the above

it ignores the time value of money

it is difficult to apply in real life

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Total risk comprises:

only systematic risk.

only unsystematic risk.

both systematic and unsystematic risk.

the difference between systematic risk and unsystematic risk.

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Coupon payments are:

the regular interest payments received by the holder of an ordinary share

the regular interest payments received by the holder of a bank deposit

the regular interest payments received by the holder of a preference share

the regular interest payments received by the holder of a bond

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