Finance - Test 1


1. If you are bearish on a given stock, which option would you buy?
    A. put option
    B. call option
    C. LEAPS
    D. covered call


2. The risk tolerance of a pension fund depends on the?
    A. life cycle of the fund
    B. proximity of payouts
    C. interest spread
    D. variable nature of the fund


3. The intrinsic value of a share of common stock is?
    A. greater than the book value
    B. equal to the replacement cost
    C. the present value of future cash flows
    D. greater than the market price


4. The valuation of an out-of-the-money option is?
    A. the time value of the option
    B. negative
    C. zero
    D. the exercise price of the option


5. Holding all else equal, a company's P/E ratio will increase if?
    A. perceptible risk increases
    B. growth opportunities increase
    C. the current year's EPS increases
    D. discount rates increase


6. Which financial statement is used to show what the firm owns?
    A. income statement
    B. cash flow statement
    C. statement of retained earnings
    D. balance sheet


7. Items designated as money that are intrinsically worthless are known as?
    A. barter items
    B. fiat money
    C. precious metals
    D. commodities


8. What is the ratio of current assets to current liabilities?
    A. return on assets
    B. return on investment
    C. current ratio
    D. cash ratio


9. Which of the following is an accrued liability?
    A. interest
    B. depreciation
    C. cost of goods sold
    D. office supplies


10. Government securities with terms of more than one year are called?
    A. government bonds
    B. treasury bills
    C. bills of exchange
    D. capital bills






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