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FIN 370 - FIN 370 Final Exam Questions & Answers at UOP E Tutors

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22) Which of the following terms means th<strong>at</strong> during periods when<br />

interest r<strong>at</strong>es change substantially, bondholders experience distinct<br />

gains and losses in their bond investments?<br />

Reinvestment r<strong>at</strong>e risk<br />

Credit quality risk<br />

Interest r<strong>at</strong>e risk<br />

Liquidity r<strong>at</strong>e risk<br />

23) Which of these is used as a measure of the total amount of<br />

available cash flow from a project?<br />

Free cash flow<br />

Investment in oper<strong>at</strong>ing capital<br />

Oper<strong>at</strong>ing cash flow<br />

Sunk cash flow<br />

24) Suppose th<strong>at</strong> Model Nails, Inc.'s capital structure fe<strong>at</strong>ures 60<br />

percent equity, 40 percent debt, and th<strong>at</strong> its before-tax cost of debt is 6<br />

percent, while its cost of equity is 10 percent. If the appropri<strong>at</strong>e<br />

weighted average tax r<strong>at</strong>e is 28 percent, wh<strong>at</strong> will be Model Nails'<br />

WACC?<br />

7.73 percent<br />

16.00 percent<br />

8.40 percent<br />

8.00 percent<br />

25) Which of these does NOT perform vital functions to securities<br />

markets of all sorts by channeling funds from those with surplus funds to<br />

those with shortages of funds?<br />

Commercial banks<br />

Insurance companies

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