Reference no: EM132770093

Questions -

Q1. In which of the following scenarios is an agency problem least likely to arise?

A) The Chair of a Board Directors also being the CEO of a publicly traded company.

B) A carpenter repairing his bookshelf.

C) A real estate agent selling your house.

D) The majority owner of a publicly listed company having super voting stock and management responsibilities.

Q2. Which of the below options are the best source of weights to calculate a company's Weighted Average Cost of Capital?

A) The values found in the Balance Sheet from the company's most recent Annual Report (regardless of whether this is the most recent publicly available document).

B) The values found in the Balance Sheet from the company's most recent Quarterly Report (assuming this is the most recent publicly available document).

C) Using the most recent stock price.

D) Market values.

Q3. Which of the following most accurately describes credit rating agencies:

i) They provide an unbiased assessment of firm default risk.

ii) The announcement of their ratings' changes often moves the YTM of corporate bonds.

iii) Unlike in school, a "D" is the best credit rating a firm's bond can receive and an "A" is the worst.

iv) There are conflict of interest issues due to the way they get paid for their work.

A) i).

B) ii) & iv).

C) ii).

D) ii), iii) & iv).

Q4. A bond is issued on January 1, 2020 and pays its coupons once annually. Its coupon rate is 4.7%, its maturity is 2 years, its face value is $1,000, and it is purchased at par on January 1, 2020. What is the rate of return from January 1, 2020 until January 2, 2021 if the bond is selling at a yield to maturity of 3.6% by January 2, 2021?

A) 1.06%.

B) 2.82%.

C) 5.73%.

D) 5.76%.