FIN 571 NERD Education Specialist /fin571nerd.com FIN 571 NERD Education Specialist /fin571nerd.com | Page 15

the____________ method, the underwriter buys the securities for less than
the offering price and accepts the risk of not selling the issue, while under
the _________ method, the underwriter does not purchase the shares but
merely acts as an agent. A. Best efforts; firm commitment B. Seasoned;
unseasoned C.
Firm commitment; best efforts D. Negotiated offer;
competitive offer E. Competitive offer; negotiated offer Question 6 All
else held constant, interest rate risk will increase when the time to
maturity: A. Increase or the coupon rate increases. B. Increase or the
coupon rate decreases. C. Decrease and the coupon rate equals zero. D.
Decrease or the coupon rate increases. E.
Decrease or the coupon rate decreases. Question 7
The process of planning and managing a firm’s long-term assets is called:
A.
Agency cost analysis. B.
Working capital
management. C.
Financial depreciation. D. Capital structure. E.
Capital budgeting. Question 8 An efficient capital
market is one in which: A. Securities always offer a positive NPV. B.
Taxes are irrelevant. C. All investments earn the
market rate of return. D.
Brokerage commissions are zero. E.
Security prices reflect all available information.
Question 9 Which one of these statements is correct concerning the cash
cycle? A.
Increasing the accounts payable period increases all
cash cycle. B.
A positive cash cycle is preferable to a negative cash
cycle. C.
The cash cycle can exceed the operating cycle if the
payables period is equal to zero. D.
The longer the cash cycle, the more
likely a firm will need external financing. E. A dopting a more liberal
accounts receivable policy will tend to decrease the cash cycle. Question
10 The costs of avoiding a bankruptcy filing by a financially distressed
firm are classified as _______ costs. A.
Direct bankruptcy B.
Financial solvency C. Flotation D.
Indirect
bankruptcy E.
Capital structure Question 11 Which one of the
following is an example of a nondiversifiable risk? A. A well-respected
president of a firm suddenly resigns B. A well-respected chairman of the
Federal Reserve Bank suddenly resigns C. A poorly managed firm
suddenly goes out of business due to lack of sales D. A key employee
suddenly resigns and accepts employment with a key competitor E. A well-
managed firm reduces its work force and automates several jobs Question
12 One disadvantage of the corporate form of business ownership is the: