Governments have a number of economic targets as part of their fiscal policy. Which of the

s to a fall in share price 2 Investors faced with increased risk will expect increased return as compensation 3 The cost of debt is usually lower than the cost of preference shares

A.2 only

B.1 and 3 only

C.2 and 3 only

D.1, 2 and 3

mium to their nominal value of $100 per loan note. The before-tax cost of debt of the company is 9% and the after-tax cost of debt of the company is 6%. What is the current market value of each loan note?

A.$92·67

B.$108·90

C.$89·93

D.$103·14

t the same as economic profit 2 Profit takes account of risk 3 Accounting profit can be manipulated by managers

A.1 and 3 only

B.1 and 2 only

C.2 and 3 only

D.1, 2 and 3

a financial objective 2 Shareholder wealth maximisation is the primary financial objective for a company listed on a stock exchange 3 Financial objectives should be quantitative so that their achievement can be measured

A.1 and 2 only

B.1 and 3 only

C.2 and 3 only

D.1, 2 and 3

Which of the following statements is/are correct?

1 Securitisation is the conversion of illiquid assets into marketable securities

2 The reverse yield gap refers to equity yields being higher than debt yields

3 Disintermediation arises where borrowers deal directly with lending individuals

A.2 only

B.1 and 3 only

C.2 and 3 only

D.1, 2 and 3

Which of the following statements is correct?

A.Once purchased, currency futures have a range of close-out dates

B.Currency swaps can be used to hedge exchange rate risk over longer periods than the forward market

C.Banks will allow forward exchange contracts to lapse if they are not used by a company

D.Currency options are paid for when they are exercised

ration. The possible future cash flows arising from the investment project have the following present values and associated probabilities:

What is the expected value of the net present value of the investment project?

A.$11,850

B.$28,700

C.$11,100

D.$76,300

Which of the following statements is correct?

A.Tax allowable depreciation is a relevant cash flow when evaluating borrowing to buy compared to leasing as a financing choice

B.Asset replacement decisions require relevant cash flows to be discounted by the after-tax cost of debt

C.If capital is rationed, divisible investment projects can be ranked by the profitability index when determining the optimum investment schedule

D.Government restrictions on bank lending are associated with soft capital rationing

nths’ time from a customer in a foreign country. The following interest rates and exchange rates are available to the company:

Working to the nearest $100, what is the six-month dollar value of the expected receipt using a money-market hedge?

A.$32,500

B.$33,700

C.$31,800

D.$31,900

Which of the following statements is correct?

A.A bonus issue can be used to raise new equity finance

B.A share repurchase scheme can increase both earnings per share and gearing

C.Miller and Modigliani argued that the financing decision is more important than the dividend decision

D.Shareholders usually have the power to increase dividends at annual general meetings of a company