BUS 401 Week 1 Quiz - All Questions Answered CorrectlyThePerfectionist
Question 1.Time is a factor when determining the value of a possible investment. As investors, all else being equal, we value investments:
- more the longer we have to wait for the payoff.
- less the longer we have to wait for the payoff.
- with predefined wait times for payoff.
- regardless of time because a dollar is always a dollar.
Question 2.The income statement shows which of the following?
- A company’s revenues and profits over some time period.
- A company’s financial position at a point in time.
- The value of inventory.
- Accounting results on a cash basis.
Question 3.Opportunity costs can vary over time and:
- are almost always close to 10%.
- represent the highest possible return you can earn on an investment.
- are always based on the interest rate offered on bank savings accounts.
- set a return that other investments must equal or exceed to be attractive.
Question 4.A key component of a product’s value is:
- the accounting profits the product produces.
- the depreciation tax shield the product produces.
- the cash flows the product produces.
- the market share the product commands.
Question 5.The accounting method you use in your checkbook is best described as:
- cash accounting.
- accrual accounting.
- deficit reduction.
- balance sheet accounting.
Question 6.In an efficient market most investors earn:
- higher than average returns because of low transaction costs.
- above average returns by following buy-and-hold strategies.
- average returns because efficiency makes earning higher returns difficult.
- returns of over 12% on NYSE stocks.
Question 7.To test the theory of market efficiency, economists:
- look for a trading rule that produces returns higher than the market average.
- look for trading rules that can repeatedly produce returns higher than the market average.
- use statistical correlations over returns over time.
- must have good luck because such results are difficult to find.
Question 8.Markets are said to be efficient if they:
- have very low transaction costs.
- quickly process and include new information in prices.
- tend to average out overpricing and underpricing.
- can forecast the future accurately.
Question 9.Suppose two investments produce the same expected cash flows. We would assign a higher value to the investment with:
- lower risk.
- higher cash flow variability.
- higher risk.
- the highest possible cash flows under ideal conditions.
Question 10.Wealth is created when a company:
- makes investments that are expected to create value greater than their cost.
- has a high stock price.
- pays regular dividends.
- obtains additional assets.
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