ACC501 Final Term Past Paper Spring 2009

FINALTERM EXAMINATION · Spring 2009 · ACC501- Business Finance

Q1. Which of the following refers to a conflict of interest between principal and agent? (1 marks)

Management Conflict Interest Conflict Agency Problem

Q2. Which of the following term refers to the ease and quickness with which assets can be converted to cash? (1 marks)

Analysis Structuring Budgeting Liquidity

Q3. Product costs do NOT include which of the following? (1 marks)

Raw material Direct labor Manufacturing overhead Administrative expenses

Q4. Which of the following can be computed by using the information only from balance sheet? (1 marks)

Equity multiplier Inventory turnover Receivable turnover Return on equity

Q5. Which of the following is CORRECT regarding the present value discount factor? (1 marks)

It is always greater than 1.0 It decreases as the discount rate increases It is equal to zero when discount rate is zero It increases as the time period increases

Q6. How much must be deposited at 8% each of the next 20 years to have Rs. 10,296.44? (1 marks)

Rs. 225 Rs. 341 Rs. 410 Rs. 452

Q7. In order to compare different investment opportunities (each with the same risk) with interest rates reported in different manners you should: (1 marks)

Convert each interest rate to an effective annual rate Convert each interest rate to a monthly nominal rate Convert each interest rate to an annual nominal rate Compare the published annual rates

Q8. You have Rs. 1,000 to invest. You have 2 choices; first is the savings account A, which earns 8.75 percent compounded annually and second is the savings account B, which earns 8.50 percent compounded monthly. Which account should you choose and why? (1 marks)

Account A; because it has a higher effective annual rate Account B; because it has a higher effective annual rate Account A; because it has the higher quoted rate Account B; because the quoted rate is higher

Q9. What will be the value of a Rs. 1,000 face-value bond with an 8% coupon rate at 8% required rate of return? (1 marks)

More than its face value Less than its face value Equal to its face value Cannot be determined without more information

Q10. Which of the following statement is FALSE regarding debt? (1 marks)

Debt is not an ownership interest in the firm. Unpaid debt can result in bankruptcy or financial failure. Debt provides the voting rights to the bondholders. Corporation s payment of interest on debt is fully tax deductible.

Q11. The relationship between real and nominal returns is described by the: (1 marks)

M&M Proposition Capital Asset Pricing Model Fisher s Effect BCG Matrix

Q12. Investors demand a higher yield as compensation to the risk of possible default. This extra premium is called: (1 marks)

Default risk premium Taxability premium Interest rate risk premium Inflation risk premium

Q13. For which type of stocks, the dividends grow at a constant rate? (1 marks)

Zero Growth Stocks Constant Growth Stocks Non-Constant Growth Stocks