FR - Quiz (2)

What is the six-month forward exchange rate?

• 20.39 Dinar per $

• 20.30 Dinar per $

• 20.59 Dinar per $

• 20.78 Dinar per $

What is the sensitivity of the net present value of the investment project to a change in sales volume?

• 7.1%

• 2.6%

• 5.1%

• 5.3%

To what extent does Gurdip believe capital markets to be efficient?

• Not efficient at all

• Weak form efficient

• Semi-strong form efficient

• Strong form efficient

Which of the following statements concerning capital structure theory is correct?

• In the traditional view, there is a linear relationship between the cost of equity and financial risk

• Modigliani and Miller said that, in the absence of tax, the cost of equity would remain constant

• Pecking order theory indicates that preference shares are preferred to convertible debt as a source of finance

• Business risk is assumed to be constant as the capital structure changes

Which of the following actions is LEAST likely to increase shareholder wealth?

• The weighted average cost of capital is decreased by a recent financing decision

• The financial rewards of directors are linked to increasing earnings per share

• The board of directors decides to invest in a project with a positive NPV

• The annual report declares full compliance with the corporate governance code

Which of the following financial instruments will NOT be traded on a money market?

• Commercial paper

• Convertible loan notes

• Treasury bills

• Certificates of deposit

Andrew Co is a large listed company financed by both equity and debt.

In which of the following areas of financial management will the impact of working capital management be smallest?

• Liquidity management

• Interest rate management

• Management of relationship with the bank

• Dividend policy

In relation to an irredeemable security paying a fixed rate of interest, which of the following statements is correct?

• As risk rises, the market value of the security will fall to ensure that investors receive an increased yield

• As risk rises, the market value of the security will fall to ensure that investors receive an increased yield

• As risk rises, the market value of the security will rise to ensure that investors receive an increased yield

• As risk rises, the market value of the security will rise to ensure that investors receive a reduced yield

Which of the following statements about the change in Pop Co's working capital financing policy is true?

• Finance costs will increase

• Re-financing risk will increase

• Interest rate risk will decrease

• Overcapitalisation risk will decrease

Which of the following is NOT an advantage of withholding a dividend as a source of finance?

• Retained profits are a free source of finance

• Investment plans need less justification

• Issue costs are lower

• It is quick