Which of the following has helped to eliminate the use of stock certificates by placing stock transactions on computers?
A. Demat account
B. Securities Exchange Commission
C. Depository Trust Company
D. Federal Depository Insurance Corporation.
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The expansion of EAR is?
A. equivalent annual rate
B. equivalent annuity rate
C. equally applied rate
D. equal advance rate
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The formula for cost of debt is __________.
A. I x ( 1 - t)
B. I+p
C. I-P
D. Ixp
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Total return is equal to________.
A. capital gain and yield
B. yield and interest
C. capital gain
D. yield
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Traditional theorists believe that.
A. there exists an optimal capital structure
B. no optimal capital structure
C. equal optimal capital structure
D. 100% debt financial organizations
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Which of the following is / are assumption(s) underlying the Miller and Modigliani analysis?
A. Capital markets are perfect
B. Investors are assumed to be rational and behave accordingly
C. There is no corporate or personal income tax
D. All of the above.
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The return component that gives periodic cash flows to the investor is known as the______________.
A. capital gain
B. interest rate
C. yield
D. unrealized gain.
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The dividend-payout ratio is equal to __________.
A. the dividend yield plus the capital gains yield
B. dividends per share divided by earnings per share
C. dividends per share divided by par value per share
D. dividends per share divided by current price per share.
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Altering the leverage ratio does not influence the market value of the firm. This is the basic premise of _______.
A. net income approach
B. traditional approach
C. modern approach
D. net operating income approach
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While calculating the weighted average cost of capital, market value weights are preferred because ____________.
A. Book value weights are historical in nature
B. This is in conformity with the definition of cost of capital as the investors minimum required rate of return
C. Book value weights fluctuate violently
D. Market value weights are fairly consistent over a period of time.
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If market interest rates are expected to rise, you would expect___________.
A. bond prices to fall more than stock prices
B. bond prices to rise more than stock prices
C. stock prices to fall more than bond prices
D. stock prices to rise and bond prices to fall.
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Which of the following is an argument for the relevance of dividends?
A. Informational content
B. Reduction of uncertainty
C. Some investors' preference for current income
D. All of the above.
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Which of the following is/are false regarding capital structure theory as stated by Miller and Modigliani?
1) If agency costs are considered, the expected agency costs increases as the debt-equity ratio decreases.
2) With the given assumptions, there is no optimal capital structure.
3) In the presence of taxes, the market value of the firm decreases by the tax shield of debt
A. Only 1st statement
B. Only 2nd statement
C. Both 1st and 3rd statements
D. All the three statements.
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Financial risk is most associated with_______________.
A. the use of equity financing by corporations
B. the use of debt financing by corporations
C. Equity investments held by corporations
D. Debt investments held by corporations.
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Retained earnings are ?
A. an indication of a company's liquidity
B. the same as cash in the bank
C. not important when determining dividends
D. the cumulative earnings of the company after dividends.
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Which of the following factors does not affect the capital structure of a company?
A. Cost of capital
B. Composition of the current assets
C. Size of the company
D. Expected nature of cash flows
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Political stability is the major factor concerning_______________.
A. exchange risk
B. systematic risk
C. non-systematic risk
D. country risk
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Arbitrage is the level processing technique introduced in _________.
A. Net income approach
B. MM approach
C. Operating approach
D. Traditional approach
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The rational expectations model of dividend policy says that ______________.
A. Since the expectations of the investors are always rational, there will be no effect of dividend policy on the valuation of the firm
B. If the investors have rational expectations, they will value a dividend paying firm higher than a non-dividend paying firm
C. If the declared dividend is in line with expectations of the investors, there will be no effect on the valuation of the firm
D. If the declared dividend is in accordance with the expectations, the change in the firms value will be minimal
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Liquidity risk_____________.
A. is the risk that investment bankers normally face
B. is lower for small OTCEI stocks than for large NSE stocks
C. is the risk associated with secondary market transactions
D. increases whenever interest rates increase.
Select an option to see the answer and solution.