Principle of Finance Milestone 3 latest update 2021/2022 Sophia Course,100% correct.GRADED, Exams of Nursing

Download Principle of Finance Milestone 3 latest update 2021/2022 Sophia Course,100% correct.GRADED and more Exams Nursing in PDF only on Docsity! Sophia Principles of Finance Milestone 3 1 Which of the following is true of portfolio diversification? A diversified portfolio containing positively correlated investments has a higher variance than a portfolio containing a single asset type. A diversified portfolio containing positively correlated investments has a lower variance than a portfolio containing a single asset type. A diversified portfolio containing negatively correlated investments has a higher variance than a portfolio containing a single asset type. CONCEPT Portfolio Considerations 2 Asecurity that falls below the security market line has, a high expected return and a high price 9,450 CONCEPT Thinking About Operating Leverage 4 The risk that your investment will lose value because your return is dependant on the stability of a secondary investment is known as. prepayment risk model risk liquidity risk CONCEPT Risk 5 Which of the following portfolios theoretically diversifies away the most risk? One whose investments have a large covariance One whose investments are highly correlated One whose investments have zero correlation CONCEPT Implications Across Portfolios 6 What is the effect on the stock price of a company that announces it earned higher-than- expected quarterly profits? The stock price will likely go up because it's a clear indication that the financial health of the company is strong. The stock price will likely go up because the announcement suggests that the company is undervalued. Change in sales = 7% Change in earnings = 10% 0.7 Cannot calculate without net income data Cannot calculate without EBIT data CONCEPT Thinking About Financial Leverage 9 Select the true statement about the bankruptcy process. A Chapter 7 bankruptcy allows a company to restructure its debt. A bankruptcy reorganization plan is voted on by a company's shareholders. Corporations file bankruptcy petitions with the states. CONCEPT Understanding the Bankruptcy Process 10 The discounted cash flow approach is useful for, determining the value of a company’s publicly traded equity graphing an asset's position on the security market line evaluating whether an asset is over-valued, under-valued or correctly priced CONCEPT Approaches to Calculating the Cost of Capital 11 Using the following variables, calculate an organization's cost of preferred stock. 25.00% 19.83% 13.33% CONCEPT Understanding Retums 13 Company A Company B Market Value of Equity $400,000 $600,000 Market Value of Debt $100,000 $800,000 Cost of Equity 9% 9% Cost of Debt 3% 4% Tax Rate 35% 35% Based solely on their current weighted average cost of capital, which company should pursue an investment opportunity with an expected return of 6.5%? Only Company B Both Company A and Company B. equity increases volatility the company will be less leveraged 16 As a securities dealer, Patrick is able to easily know and compare the prices of stocks, which are now consolidated in a national market system. Which federal regulation established this process? Sarbanes-Oxley Act of 2002 Securities Exchange Act of 1934 Securities Act of 1933 CONCEPT Market Regulation 17 What is the amount of money foregone by investing in one asset compared to another known as? The weighted average cost of capital The required rate of return on capital The overall cost of capital CONCEPT The Basics of the Cost of Capital 18 Asocial media start-up wants to raise funds to support growth by offering shares to a select group of investors. What type of market transaction should they pursue?