FIN 571 TUTOR Let's Do This /fin571tutor.com FIN 571 TUTOR Let's Do This /fin571tutor.com | Page 25

• Question 4 What is the present value of $6,811 to be received in one
year if the discount rate is 6.5 percent ?
A. $6,395.31
B. $7,253.72
C. $6,023.58
D. $6,643.29
E. $6,671.13
• Question 5 Under 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.