LAW531 Week 3 Learning Team Assignment Week 3 IRAC Brief

The week's assignment concerns briefing a case from the readings. You can pick any case from the readings. You must pick an actual court case and give the citation. The brief should concern a legal case that is relevant to the following Week 3, Torts and Criminal Law, objectives.

 Brief the case. Use the IRAC methodology. Discuss the:

 

• I: Issue
• R: Rule
• A: Analysis
• C: Conclusion

 The brief is followed by discussion of whether your team agrees or disagrees with the court opinion.

 The paper is a minimum 1000 words in length

Ethics Ouch! McDonald's Coffee Is Too Hot!

McDonald's Corporation found itself embroiled in one of the most famous negligence cases of modern times. Stella Liebeck, a 79-year-old resident of Albuquerque, New Mexico, visited a drive-through window of a McDonald's restaurant with her grandson Chris. Her grandson, the driver of the vehicle, placed the order for breakfast. When breakfast came at the drive-through window, Chris handed a hot cup of coffee to Stella. Chris pulled over so that Stella could put cream and sugar in her coffee. Stella took the lid off the coffee cup she held in her lap and the hot coffee spilled in her lap. The coffee spilled all over Stella, who suffered third-degree burns on her legs, thighs, groin, and buttocks. Stella was driven to the emergency room and was hospitalized for seven days. She required medical treatment and later returned to the hospital to have skin grafts. She suffered permanent scars from the incident.

Stella's medical costs were $11,000. Stella asked McDonald's to pay her $20,000 to settle the case, but McDonald's offered only $800. Stella refused this settlement and sued McDonald's in court for negligence for selling coffee that was too hot and for failing to warn her of the danger of the hot coffee it served. At trial, McDonald's denied that it had been negligent and asserted that Stella's own negligence—opening a hot coffee cup on her lap—had caused her injuries. The jury heard the following evidence:

·         McDonald's enforces a quality-control rule that requires its restaurants and franchises to serve coffee at 180 to 190 degrees Fahrenheit.

·         Third-degree burns occur on skin in just two to five seconds when coffee is served at 185 degrees.

·         McDonald's coffee temperature was 20 degrees hotter than coffee served by competing restaurant chains.

·         McDonald's coffee temperature was approximately 40 to 50 degrees hotter than normal house-brewed coffee.

·         McDonald's had received more than 700 prior complaints of people who had been scalded by McDonald's coffee.

·         McDonald's did not place a warning on its coffee cups to alert patrons that the coffee it served was exceptionally hot.

Based on this evidence, the jury concluded that McDonald's acted recklessly and awarded Stella $200,000 in compensatory damages, which was then reduced by $40,000 because of her own negligence, and $2.7 million in punitive damages. The trial court judge reduced the amount of punitive damages to $480,000, which was three times the amount of compensatory damages. McDonald's now places a warning on its coffee cups that its coffee is hot. Liebeck v. McDonald's Restaurants, P.T.S., Inc. (New Mexico District Court, Bernalillo County, New Mexico, 1994)

 

LAW531 Week 2 Week 2 Individual Report on Business Forms

Resources: Legal Environment of Business: Online Commerce, Business Ethics, and Global Issues:  Ch. 14, 15, 16 and 17; Week 2 Electronic Reserve Readings; Legal Source database located in the Week 2 Electronic Reserve Readings

Scenario: You are sole proprietor presenting to a group of investors where you are seeking 20 million dollars to raise capital for your manufacturing company.

Prepare a memo discussing the following to investors:

Choose the one form of organization best suited for your manufacturing company and explain why:

• Partnership
• Limited Liability Partnership
• Limited Liability Company (including single member LLC)
• S Corporation
• Franchise
• Corporation

Explain for the investors which form of organization (from the list above) would be the least suited and why?

(The legal form an entity or individual takes is a decision that must be considered from a risk and liability perspective, not simply one of ease of formation or cost. Form can impact the entities ability to grow and, in some circumstances, its ability to survive. As you consider this reality and approach this assignment, consider not only the form the business takes but also the way it will be governed. Remember the law requires business leaders conduct their business ethically and within the boundaries of the law.)   

Summarize for investors what legal liabilities could arise for the Director or officer of that board?
Explain how you could minimize those liabilities for the Director or officer of that board.

A minimum word count of 1000 words is needed.

 

 

 

LAW531 Week 1 ADR Clause

Create an ADR clause may be used in any Learning Team throughout the program

The clause should include at least one type of ADR to be used in Learning Teams to resolve disputes.

 The clause will identifies possible learning team disputes that are subject to ADR and should include all provisions necessary to enable ADR to occur.

 Word count - A minimum word count of 500 words

LAW531 Final Exam (2019) SCORE 100 PERCENT

Question 1
Which of the following applies to trade restraints that are inherently anticompetitive?
The rule of reason
The pro rata rule
The per se rule
The rule of four

Question 2
When one party acquires a license to use another party's business model and intellectual property in the distribution of goods and services, the arrangement is a __________.

    limited liability partnership
    franchise
    joint venture
    Kickback

Question 3
Which of the following is prohibited by the Food, Drug, and Cosmetic Act (FDCA) with regard to food?

    The sale of adulterated food
    Labeling of genetically engineered food products
    The sale of non-organic food products
    Labeling of raw seafood products

Question 4
The obligation owed by individuals to one another not to cause any unreasonable harm or any risk of harm is called:

    duty of restoration.
    duty of care
    duty of loyalty.
    duty of restitution.

Question 5
When can an arbitrator's decision and award be appealed to the courts?

    While drafting a submission agreement
    When an arbitration is binding
    While entering a negotiation
    When an arbitration is nonbinding

Question 6
Which of the following is an advantage of franchising?

    It enables two businesses to pool their resources to pursue a common goal.
    It allows a business to consist of only general partners.
    It allows businesses to reach profitable new markets.
    It grants free access to the intellectual property of a business to anyone in the same market.

Question 7
Workers' compensation is defined as the:

    system that provides retirement and death benefits to covered employees and their dependents.
    insurance obtained by employees from private insurance companies and government-sponsored programs.
    remuneration awarded to employees and their families when the employees are injured on the job.
    set of programs mandated by the government to ensure safety in places of work.

Question 8
Corporate officers are elected by a corporation's __________.

    owners
    board of directors
    common stockholders
    preferred stockholders

Question 9
Which of the following is a difference between embezzlement and larceny?

    Embezzlement is the snatching of personal property from a person's home, whereas larceny is the snatching of personal property from a person on the street.
    Embezzlement is an unintentional tort, whereas larceny is a nonintent crime.
    Embezzlement is the stealing of property by a person to whom the property was entrusted, whereas larceny is the stealing of property by a person not entrusted with it.
    Embezzlement is usually punishable by the payment of monetary damages, whereas larceny is usually punishable by the death penalty.

Question 10
Which of the following is a criticism of the ethical fundamentalism theory?

    It does not allow people to decide for themselves what is right and what is wrong.
    It is impossible in the real world to expect that everyone in society will obey moral rules.
    It does not reach an agreement on what the universal rules should be.
    It is impossible to measure the "good" that may result from different actions.

Question 11
The manifestation of the substance of a contract by two or more individuals is called __________.

    consideration
    an offer
    acceptance
    an agreement

Question 12
Which of the following is a remedy that requires the breaching party to perform the acts promised in a contract?

    Specific performance
    Binding arbitration
    Punitive damages
    Special damages

Question 13
Laws that prohibit discrimination based on race, gender, or religion in the workplace primarily serve the function of:

    advocating social justice.
    providing a basis for compromise.
    creating a new status quo.
    minimizing the freedom of employees.

Question 14
Which of the following is a difference between arbitration and mediation?

    Arbitration is an informal method of dispute resolution, whereas mediation is a formal method of dispute resolution.
    The decision of an arbitrator is nonbinding, whereas the decision of a mediator is binding.
    The role of an arbitrator is merely to assist parties in reaching a settlement, whereas the role of a mediator is similar to the role of a trial judge.
    An arbitrator is authorized to issue an award, whereas a mediator can only assist in reaching a settlement.

Question 15
Which of the following is a requirement for obtaining a patent for an invention?

    The invention needs to be made of highly valuable components.
    The invention must be in the form of a service.
    The invention must be original.
    The invention needs to be recognizable to the general public.

Question 16
An agency that appears to be created by a principal but does not exist in reality is called a(n) __________.

    apparent agency
    implied agency
    agency by ratification
    fully disclosed agency

Question 17
Laws that protect governments from being overthrown primarily serve the function of:

    advocating social justice
    providing bases for compromise.
    maintaining the status quo.
    minimizing individual freedom.

Question 18
Ken owns a small convenience store in a street corner in California. One afternoon, a teenage boy enters his store, looks around, and prepares to walk out without buying anything. Ken is wary of the boy because of the boy's shabby clothing. He stops and asks the boy to empty his pockets and then questions him for about five minutes. After finding that the boy does not have anything from the store on him, Ken reluctantly lets him go. Which of the following is a merchant protection statute that Ken has violated?

    Reasonable grounds for suspicion
    Reasonable duration of detention
    Adverse possession
    Adequate assurance of performance

Question 19
Corporate officers are best described as:

    directors elected by a corporation's shareholders.
    partners pursuing a joint venture transaction
    owners of a corporation with limited liability for its debts and obligations.
    employees appointed to manage the daily operations of a corporation.

Question 20
Which of the following scenarios is an example of law and ethics contradicting each other?

    A florist in the United States employs an illegal immigrant to help the immigrant and her family overcome their financial difficulties.
    A large apparel retailer copies the trademarked garment designs of a well-known fashion designer.
    A restaurateur, whose restaurant is violating labor laws, bribes a federal official to prevent him from reporting the violations.
    An iron-ore manufacturing company provides its employees with high-quality safety equipment.

Question 21
Robert orders coffee while having breakfast in a diner. He suffers third-degree burn injuries when the coffee accidently spills on him. He presses charges against the diner for failing to notify him that the coffee was exceptionally hot. In this scenario, the diner is guilty of a(n) __________.

    unintentional tort
    intent crime
    intentional tort

Question 22
Which of the following best describes the term warranty?

    It refers to the transfer of possession of stolen property to a person who had bought the property without the knowledge that it has been stolen.
    It is a purchaser's title to goods obtained by the impersonation of another person.
    It refers to the terms in a sales contract stipulating the party that will bear the risk of loss of goods during shipment.
    It is the seller's assurance to a buyer that the goods sold meet certain standards of quality.
    nonintent crime

Question 23
Which of the following is a characteristic of torts?

    They are punishable by the death penalty.
    They are usually not tried by the jury.
    They are brought to court by a plaintiff.
    They are tried by criminal procedure.

Question 24
A group boycott occurs when:

    competitors at one level of distribution collectively refuse to deal with others at a different level of distribution.
    parties enter into a trade agreement that has greater anticompetitive effects than procompetitive effects.
    parties at different levels of distribution enter into an agreement to adhere to a schedule that will stabilize prices.
    competitors agree that they will distribute their goods to only a particular portion of the market.

Question 25
A goal of the Sarbanes-Oxley Act of 2002 is to:

    control and closely monitor the financial accounts of all corporations in the United States.
        allow directors and executive officers of public companies to be given personal loans from the companies.

end conflicts of interest, establishing better corporate governance.

enable smooth settlement of alleged fraud among major corporations.

Question 26
Helen buys a toy railway set for her 3-year-old son, Ben. The product's cover mentions that the toy is suitable for children only aged between 3 and 12. While playing with the toy one evening, without Helen's supervision, Ben chokes on an inch-long engine driver figure that forms part of the train. Although he survives, he is traumatized by the incident. For which type of defect can Helen sue the toy manufacturer?

    Failure to tamperproof
    Defect in product packaging
    Defect in manufacture
    Failure to warn

Question 27
Insider trading is considered illegal because:

    it results in excessive losses for the company.
    it makes use of nonmaterial public information.
    it fails to account for the short-swing profits brought into a company.
    it limits investment opportunities for the investing public.

Question 28
When an employer does not discriminate against women in general but treats women above the age of 40 differently, the employer is practicing __________.

    color discrimination
    sex-plus discrimination
    religious discrimination
    racial discrimination

Question 29
The power and authority to exclude competition or control prices is known as __________.

    enumerated power
    monopoly power
    implied power
    reserved power

Question 30
Which of the following is a category of torts?
    Professional malpractice
    Personal liability
    Strict liability
    Nonintent crime

Exam 500304 Cost of Capital......FINANCE

1.   What's the abbreviation for the overall return that a firm must make on its existing assets, used as the required rate of return on any investment that has essentially the same risks as existing operations?
    
  A. WACC

  B. ROE

  C. CM

  D. NPV



2.   Analysts project Microsoft (MSFT) will have an annualized dividend of $1.50 and a long-term growth rate of 10 percent. Currently, the stock price is $60. Using the dividend growth model approach, what's the implied cost of equity?
    
  A. 12.5 percent

  B. 11 percent

  C. 10 percent

  D. 2.5 percent



3.   New Schools expects an EBIT of $87,000 every year, forever. The firm currently has no debt, and its cost of equity is 14.6 percent. The firm can borrow at 7.4 percent, and the corporate tax rate is 34 percent. What will the value of the firm be if it converts to 50 percent debt?
    
  A. $460,146.57

  B. $381,796.47

  C. $377,407.16

  D. $437,552.08



4.   Galaxy Products is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 175,000 shares of stock outstanding. Under Plan II, there would be 90,000 shares of stock outstanding and $1.4 million in debt. The interest rate on the debt is 7 percent, and there are no taxes. What's the break-even EBIT?
    
  A. $201,764.71

  B. $341,414.14

  C. $351,111.11

  D. $287,878.78


5.   What's the concept of using debt to make a return known as?
    
  A. Debt reliance

  B. Financial liquidity

  C. Debt coverage

  D. Financial leverage


6.   Because the WACC varies with the use of funds rather than the source of funds, some firms evaluate new projects by sorting projects into risk classes, and add or subtract adjustment factors from the WACC. This approach is called the
    
  A. DuPont approach.

  B. divisional approach.

  C. pure play approach.

  D. subjective approach.


7.   According to the static tradeoff theory, what's the optimal capital structure?
    
  A. A firm should borrow up to the point at which the tax benefit from an extra dollar in debt is exactly equal to the cost that comes from the increased probability of financial distress.
  B. A firm should borrow up to the point at which the tax benefit from an extra dollar is equal to zero.

  C. A firm should have equal parts equity and debt.

  D. A firm should borrow up to the point at which the interest is equal to the total tax expense.





 
8.   Which of the following is not a major disadvantage to the SML approach?
    
  A. We rely on the past to predict the future, and economic conditions can change quickly.

  B. It requires that we estimate the market risk premium, and if this estimate is poor, the resulting cost of equity will also be poor.

  C. It requires that we estimate the beta coefficient of the stock, and if this estimate is poor, the resulting cost of equity will also be poor.

  D. It doesn't explicitly adjust for risk






9.   Silo Mills is an all-equity financed firm that has a beta of 1.14 and a cost of equity of 12.8 percent. The risk-free rate of return is 2.8 percent. The firm is currently considering a project that has a beta of 1.03 and a project life of six years. What discount rate should be assigned to this project?
    
  A. 13.62 percent

  B. 11.84 percent

  C. 13.33 percent

  D. 12.09 percent


 
10.   Which of the following is true about a firm with no equity financing?
    
  A. The after-tax cost of debt = WACC

  B. The return on equity = WACC

  C. The cost of debt = WACC

  D. The return on equity = cost of debt



11.   A higher debt level usually equates to a
    
  A. larger tax shield and decreased financial risk.

  B. smaller tax shield and increased financial risk.

  C. larger tax shield but increased financial risk.

  D. smaller tax shield and decreased financial risk.



12.   Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, how long after a firm files for bankruptcy protection do creditors have to wait before submitting their own reorganization plan to the court?
    
  A. 18 months

  B. 45 days

  C. 180 days

  D. 12 months



13.   Alphabet, Inc. (GOOGL) has a 40 percent debt/asset ratio; assume a tax rate of 16 percent. The average yield to maturity on GOOGL's bonds is 3 percent. Your market analyst estimates that the risk-free rate is 1 percent and that the market risk premium is 7 percent. The firm's beta coefficient is 0.97. What's Alphabet's weighted average cost of capital (WACC)? (Round to the nearest tenth of a percent.)
    
  A. 6 percent

  B. 5.7 percent

  C. 5.9 percent

  D. 7.3 percent



14.   The Shoe Outlet has paid annual dividends of $.65, $.70, $.72, and $.75 per share throughout the last four years, respectively. The stock is currently selling for $9 a share. What's this firm's cost of equity?
    
  A. 11.79 percent

  B. 9.53 percent

  C. 13.65 percent

  D. 8.74 percent



15.   Deep Mines has 14 million shares of common stock outstanding with a beta of 1.15 and a market price of $42 a share. There are 900,000 shares of 9 percent preferred stock outstanding, valued at $80 a share. The 10 percent semiannual bonds have a face value of $1,000 and are selling at 91 percent of par. There are 220,000 bonds outstanding that mature in 17 years. The market risk premium is 11½ percent, T-bills are yielding 7½ percent, and the firm's tax rate is 32 percent. What discount rate should the firm apply to a new project's cash flows if the project has the same risk as the firm's typical project?
    
  A. 14.72 percent

  B. 13.15 percent

  C. 15.54 percent

  D. 14.59 percent



16.   Hanover Tech is currently an all-equity firm that has 320,000 shares of stock outstanding with a market price of $19 a share. The current cost of equity is 15.4 percent, and the tax rate is 34 percent. The firm is considering adding $1.2 million of debt with a coupon rate of 8 percent to its capital structure. The debt will be sold at par value. What's the levered value of the equity?
    
  A. $5.209 million

  B. $6.708 million

  C. $6.512 million

  D. $5.288 million



17.   Mulberry, Inc. has a weighted average cost of capital (ignoring taxes) of 20 percent. It can borrow at 10 percent. Mulberry has a target ½ debt/equity ratio. Using the M&M Proposition II, what's the cost of equity?
    
  A. 29 percent

  B. 25 percent

  C. 31 percent

  D. 15 percent



18.   Flotation costs are the costs associated with
    
  A. market inefficiencies.

  B. reporting.

  C. bankruptcy.

  D. new stock or bond issues.



19.   The dividend growth model is used to calculate
    
  A. the cost of debt by using the equation for a growing perpetuity, plugging in the current price of the bond, the coupon, and the expected growth rate and solving for R(D).
  B. the weighted average cost of capital by using the equation for a growing perpetuity, plugging in the current price of the stock, the dividend paid, and the expected growth rate. Then we solve for R(E).
  C. the cost of equity by comparing the dividend growth to similar firms.

  D. the cost of equity by using the equation for a growing perpetuity, plugging in the current price of the stock, the dividend paid, and the expected growth rate. Then we solve for R(E).

 
20.   Amazon Inc. (AMZN) has 55 percent equity-to-asset ratio. The average yield to maturity on AMZN's bonds is 3.2 percent; assume a tax rate of 30 percent. The firm's estimated required rate of return on equity is estimated at about 10.8 percent. What's Amazon's weighted average cost of capital (WACC)? (Round to the nearest tenth of a percent.)
    
  A. 6.1 percent

  B. 7.3 percent

  C. 6.6 percent

  D. 6.9 percent

Exam 500300 corporate finance.2019

1.   Which of the following would result in an increase in cash flow and a source of cash?
    
  A. A decrease in accounts payable

  B. A decrease in long-term debt

  C. A decrease in inventory

  D. An increase in accounts receivable

2.   The DuPont identity breaks down return on equity (ROE) into three parts, which are
    
  A. overall efficiency (as measured by profit margin), asset-use efficiency (as measured by current asset turnover), and financial leverage (as measured by long-term debt ratio).
  B. operating efficiency (as measured by inventory turnover), asset use efficiency (as measured by total asset turnover), and short-term solvency (as measured by the current ratio).
  C. operating efficiency (as measured by profit margin), asset use efficiency (as measured by total asset turnover), and financial leverage (as measured by the equity multiplier).
  D. operating efficiency (as measured by inventory turnover), customer reach (as measured by total customers served), and short-term solvency (as measured by the current ratio).

3.   What's the most likely reason a firm would decide to go public?
    
  A. To increase the total liability of the firm

  B. To increase the value of the firm

  C. As an inexpensive way to raise new capital

  D. As an exit strategy for venture capital investors

4.   In corporate finance, the term dilution is used to
    
  A. determine when cash flows can be distributed to shareholders as dividends.

  B. determine when and how to go public.

  C. discuss the effects of liquidity, solvency, and bankruptcy.

  D. determine the loss in existing shareholder value.

5.   RJ's has a fixed asset turnover rate of 1.26 and a total asset turnover rate of .97. Sam's has a fixed asset turnover rate of 1.31 and a total asset turnover rate of .94. Both companies have similar operations. Based on this information, RJ's must be
    
  A. using its total assets more efficiently than Sam's.

  B. using its fixed assets more efficiently than Sam's.

  C. generating $1 in sales for every $1.26 in net fixed assets.

  D. generating $1.26 in net income for every $1 in net fixed assets.

6.   A.K. Stevenson wants to raise $10.2 million through a rights offering. The subscription price is set at $16 a share. Currently, the company has 1.7 million shares outstanding with a current market price of $25 a share. Shareholders will receive one right for each share of stock they currently own. How many rights will be needed to purchase one new share of stock in this offering?
    
  A. 2.40 rights

  B. 2.75 rights

  C. 2.82 rights

  D. 2.67 rights


7.   A firm generated net income of $911. The depreciation expense was $47, and dividends were paid in the amount of $25. Accounts payables increased by $15, accounts receivables increased by $28, inventory decreased by $14, and net fixed assets decreased by $8. There was no interest expense. What was the net cash flow from operating activity?
    
  A. $922

  B. $865

  C. $776

  D. $959


8.   The PE ratio falls within which of the following classifications of financial ratios?
    
  A. Market value measures

  B. Asset management or turnover measures

  C. Profitability measures

  D. Short-term solvency ratios

9.   Bonner Automotive has shareholders's equity of $218,700. The firm owes a total of $141,000, of which 40 percent is payable within the next year. The firm has net fixed assets of $209,800. What's the amount of the net working capital?
    
  A. $125,600

  B. $56,500

  C. $149,900

  D. $93,500

10.   Shareholders's equity can best be described as
    
  A. decreasing whenever new shares of stock are issued.

  B. representing the residual value of a firm.

  C. including patents, preferred stock, and common stock.

  D. a firm's financial leverage.

11.   A firm has total debt of $4,850 and a debt-equity ratio of .57. What's the value of the total assets?
    
A. $13,358.77
  B. $7,253.40

  C. $11,034.00

  D. $6,128.05


12.   Earnings before interest and taxes (EBIT) would equal operating cash flow (OCF) if
    
  A. there was no depreciation, no amortization, and no other noncash expenses.

  B. cash flow from assets equaled cash flow from creditors plus cash flow to stockholders.

  C. any factors applied; EBIT is always equal to operating cash flows.

  D. depreciation was equal to taxes, and if there was no amortization.



 
13.   A firm has an interval measure of 48. This means that the firm has sufficient liquid assets to
    
  A. cover its operating costs for the next 48 days.

  B. pay all of its debts that are due within the next 48 hours.

  C. cover its operating costs for the next 48 hours.

  D. pay all of its debts that are due within the next 48 days.


 
14.   What type of financial statement starts by taking the cash balance of a firm at the beginning of the year, and reconciles any changes in account balances?
    
  A. Balance sheet

  B. Income statement

  C. Statement of cash flows

  D. Statement of owners's equity



 
15.   Which term relates to the cash flow that results from a firm's ongoing, normal business activities?
    
  A. Net working capital

  B. Cash flow from assets

  C. Capital spending

   D. Operating cash flow



 
16.   What's the best description of a prospectus?
    
  A. A report stating that the SEC recommends a new security to investors

  B. A document that describes the details of a proposed security offering along with relevant information aboutthe issuer

  C. An advertisement in a financial newspaper that describes a security offering

  D. A letter issued by the SEC that outlines the changes required for a registration statement to be approved


.
 
17.   A firm has total assets of $310,100 and net fixed assets of $168,500. The average daily operating costs are $2,980. What's the value of the interval measure?
    
  A. 31.47 days

  B. 47.52 days

  C. 68.05 days

  D. 56.22 days

















 


 






 
18.   Business Aid is funded by a group of wealthy investors for the sole purpose of providing funding for individuals and small firms that are trying to convert their new ideas into viable products. This type of funding is called
    
  A. green shoe funding.

  B. red herring funding.

  C. venture capital.

  D. life-cycle capital.



19.   If a firm has a notes payable balance of $42,400 at the end of 2014, and $30,100 at the end of 2015, which of the following statements about accounts payable is correct?
    
  A. Notes payable increased by $12,300 and represented a use of cash.

  B. Notes payable decreased by $12,300 and represented a use of cash.

  C. Notes payable decreased by $12,300 and represented a source of cash.

  D. Notes payable increased by $12,300 and represented a source of cash.

20.   What's the definition of a syndicate?
    
  A. A group of underwriters sharing the risk of selling a new issue of securities

  B. A block of investors who control a firm

  C. A bank that loans funds to finance the start-up of a new firm

  D. A group of attorneys providing services for an IPO




 

Exam 500303 Risk Return....FINANCE

1.   Which one of the following categories of securities had the highest average return for the period 1926–2013?
    
  A. Long-term government bonds

  B. Small-company stocks

  C. Long-term corporate bonds

  D. Large-company stocks



2.   A stock has a beta of 1.2 and an expected return of 17 percent. A risk-free asset currently earns 5.1 percent. The beta of a portfolio comprised of these two assets is 0.85. What percentage of the portfolio is invested in the stock?
    
  A. 92 percent

  B. 77 percent

  C. 71 percent

  D. 81 percent


3.   _______ market efficiency suggests that at a minimum, the current price of the stock reflects the stock's own past prices.
    
  A. Weak form

  B. Strong form

  C. Semistrong

  D. Loose form



4.   Six months ago, you purchased 100 shares of stock in Global Trading at a price of $38.70 a share. The stock pays a quarterly dividend of $.15 a share. Today, you sold all of your shares for $40.10 per share. What's the total amount of your dividend income on this investment?
    
  A. $15

  B. $45

  C. $50

  D. $30


5.   Assume all stock prices fairly reflect all of the available information on those stocks. Which one of the following terms best defines the stock market under these conditions?
    
  A. Evenly distributed market

  B. Blume's market

  C. Efficient capital market

  D. Zero volatility market

6.   Suppose that you purchased 300 shares of a stock at $36 per share, ignoring all commissions. Assume the stock paid a dividend of $2.15 per share for the year. The stock price rose to $41.05 per share and was then sold at that price. What was the dividends yield? (Round your answer to the nearest tenth of a percent.)
    
  A. 5.2 percent

  B. 6 percent

  C. 5 percent

  D. 6.5 percent






 


 
7.   Aimee is the owner of a stock with annual returns of 27 percent, –32 percent, 11 percent, and 23 percent for the last four years, respectively. She thinks the stock may be able to achieve a return of 50 percent or more in a single year. What's the probability that your friend is correct?
    
  A. Greater than 1 percent but less than 2.5 percent

  B. Greater than 16 percent

  C. Greater than .5 percent but less than 1 percent

  D. Greater than 2.5 percent but less than 16 percent


 

8.   Eliminating unsystematic risk by holding a portfolio of different assets reflects
    
  A. the elimination of systematic risk.

  B. beta coefficiency.

  C. the principle of diversification.

  D. portfolio variance spreading.


 

9.   West Wind Tours stock is currently selling for $48 a share. The stock has a dividend yield of 3.2 percent. How much dividend income will you receive per year if you purchase 200 shares of this stock?
    
  A. $307.20

  B. $362.00

  C. $24.96

  D. $36.20


10.   Systematic risk is measured by the
    
  A. beta.

  B. arithmetic average.

  C. mean.

  D. geometric average.





11.   The market risk premium—the concept that investors should be rewarded for taking on extra risk—is illustrated as the
    
  A. slope of the SML.

  B. y-access intersection of the SML.

  C. x-access intersection of the SML.

  D. peak of the SML.


 

12.   One year ago, you purchased a stock at a price of $32.15. The stock pays quarterly dividends of $.20 per share. Today, the stock is selling for $33.09 per share. What's your capital gain on this investment?
    
  A. $1.14

  B. $.94

  C. $1.04

  D. $.74


 
13.   With regard to the efficient markets hypothesis (EMH), which of the following answers illustrates market inefficiencies?
    
  A. Delayed reactions, overreactions, and corrections

  B. Insider trading, corruption, and government bailouts

  C. An immediate price fall after bad news is announced

  D. An immediate price jump after good news is announced



14.   The reward-to-risk ratio for stock A is less than the reward-to-risk ratio of stock B. Stock A has a beta of 0.82 and stock B has a beta of 1.29. This information implies that
    
  A. stock A is riskier than stock B, and both stocks are fairly priced.

  B. either stock A is overpriced, stock B is underpriced, or both.

  C. either stock A is underpriced, stock B is overpriced, or both.

  D. stock A is less risky than stock B, and both stocks are fairly priced.


 


15.   Suppose you estimate a boom will occur only 45 percent of the time and that the expected return on the portfolio in such an environment is 40 percent. You also estimate that a recession will occur 55 percent of the time and that the expected return in such an environment is 5 percent. What's the expected return of the portfolio?
    
  A. 20.75 percent

  B. 5 percent

  C. 40 percent

  D. 22.5 percent


16.   How can the expected return of a portfolio be calculated?
    
  A. Take a weighted average by taking the expected return of each asset and multiplying by their proportion in the portfolio. Add the results.
  B. Square the expected returns before multiplying by the portfolio weights. Add each of the results, and then take the square root of the sum.
  C. If the portfolio has two assets, multiply the expected returns by 50 percent, and then add the results. If the portfolio has three assets, multiply the expected returns by 1/3, and so on. Then multiply the result. The proportions of each asset do not affect the answer.
  D. Expected return can be calculated only with Excel.





17.   How do you calculate risk premium?
    
  A. The risk-free rate minus the expected return

  B. Expected return plus the risk-free rate

  C. Expected return divided by the risk-free rate

  D. Expected return minus the risk-free rate



18.   The common stock of United Industries has a beta of 1.34 and an expected return of 14.29 percent. The risk-free rate of return is 3.7 percent. What's the expected market risk premium?
    
  A. 7.90 percent

  B. 7.02 percent

  C. 11.22 percent

  D. 10.63 percent




19.   The term "unsystematic risk" is synonymous with which of the following?
    
  A. Undiversifiable risk

  B. Systematic risk

  C. Beta risk

  D. Diversifiable risk



20.   The intercept point of the security market line is the rate of return that corresponds to
    
  A. a return of zero.

  B. the market rate.

  C. the risk-free rate.

  D. the market risk premium

.