Busıness Fınance I

Yanıt Açıklaması: According to Baumol's model transaction cost is known and is constant. So C is the answer.

Yanıt Açıklaması: The cash flows that are associated with stocks are the dividends that the firm may pay and price that the investor receives when she sells the shares. Dividends are paid only after interest and other required payments are made to creditors and they are not fixed amounts; Dividends depend on the profitability, growth prospects, investment requirements and payout decisions of the company. As a result, their timing and quantities are uncertain and they are more risky than debt securities. In order to compensate for this greater risk, they need to offer greater expected returns in order to make them attractive to investors. Therefore, the correct option is A.

Yanıt Açıklaması: The flexibility of financial planning by the use of the capabilities of information technology enables to realize scenario analysis to evaluate the effects of the possible financial and environmental changes on corporate activities in the future.

Yanıt Açıklaması: Income statement reports the success or failure of the company’s operations for a period of time by listing all information related to company’s income and costs during the period. Income statement shows the amount of sales, all the costs incurred in making those sales and all the overhead costs incurred in running the operations of the company so it would be able to deliver on its promises to customers.

Yanıt Açıklaması: If you purchase stocks of a company, you become an owner of that company. As an owner, you have several rights. One of them is voting right. You have a right to vote in the shareholders’ meeting. Second, you have a right to receive dividends, if the corporation decides to distribute any. They will be cash flows you expect to get in investing in stocks. Third, you have pre-emptive right. If the company issues additional shares, you have a right to purchase your share of these shares (sometimes at a discount) before the new stocks are offered to the public in order to protect your initial share in the company. Fourth, the right to receive your share of the residual (Assets Liabilities) in case of dissolution of the company. Note that this residual may be significantly different from the accounting number as it will depend on market values and not accounting values. As also understood from the information given, if you purchase stocks of a company you have all of the rights in the options, so the correct answer is E.

Yanıt Açıklaması: Market, portfolio or systematic risk is the uncertainty inherent to the market that cannot be controllable. On the other hand, the diversifiable, unique or unsystematic risk is the uncertainty that is related to the invested asset. Therefore, unsystematic risk can be reduced through diversification whereas systematic risk cannot.

Yanıt Açıklaması: Bonds with longer maturity have a higher sensitivity to changes in market interest rates and have higher interest rate risk.

Yanıt Açıklaması: Similar to covariance, the correlation between two returns is not affected by the ordering of variables.

Yanıt Açıklaması: The correlation lies between -1 and +1. The maximum diversification benefit would be reached at -1 correlation.

Yanıt Açıklaması: value= $3*(1+0.015) /(0.08 - 0.015) = $46.85

Yanıt Açıklaması: Here, the investor should consider: (i) Expected return of individual securities, and how each would contribute to the portfolio return, (ii) Standard deviation of individual securities, correlation between securities, and how these would impact the standard deviation of the portfolio. The monetary amount of a portfolio is not relative. Therefore, the answer is E

Yanıt Açıklaması: If market interest rates increase, the values of bonds decline.

Yanıt Açıklaması: The cash flows that are associated with stocks are the dividends that the firm may pay and price that the investor receives when she sells the shares. Dividends are paid only after interest and other required payments are made to creditors and they are not fixed amounts; Dividends depend on the profitability, growth prospects, investment requirements and payout decisions of the company. As a result, their timing and quantities are uncertain and they are more risky than debt securities. In order to compensate for this greater risk, they need to offer greater expected returns in order to make them attractive to investors. As also understood from the information given, dividends depend on all of  the factors in the options, so the correct answer is E.

Yanıt Açıklaması: ABC analysis is a system of inventory control which is also named as Selective Inventory Control, or SIC. ABC analysis is a system of categorization by using three classes: s or categories used in the system. The first class of A, is the category for items that are considered to be important or critical. The second category of B, is the classification for items of average importance. Finally, category C is the designation for relatively unimportant items.

Yanıt Açıklaması: A bond is a type of debt security which means that it represents borrowing by the firm. However, rather than getting a loan from a bank or other financial institution, the bond allows the funds to be obtained from a large number of parties under common standardized terms. Bonds can usually only be issued by governments or large, well known firms. Bonds obligate the issuer to make specified payments to the bondholder on specified dates over a specified time period (maturity). These specified payments are in the form of coupon payments and par value. Bonds can be issued by corporations or governments. They can be considered interest only loans because the issuer pays only coupon payments until maturity and the face value at maturity. Unlike amortized loans, the issuer does not pay any part of par value during the life of the bond. For the annual coupon paying bonds, the number of times that coupons are paid indicates maturity. Once the bond is issued, the maturity declines as time passes and coupon payments are made. As also understood from the information given, the statements in the options II, III, IV, V and VI are correct, so the correct answer is E. The statement in the option I is not correct because of the fact that bonds can be issued by corporations or governments.

Yanıt Açıklaması: If the market rate of interest and the bond’s yield-to-maturity does not change over this period, then the bond’s rate of return will be equal to its yield-to-maturity. If there is a decline in interest rates, the rate of return will be higher than the bond’s yield-to-maturity as in the case of the example. If there is an increase in interest rates, the rate of return will be less than the bond’s yield to maturity because of the decline in the value of the bond with the increase in interest rates.

Yanıt Açıklaması: Rate of return = (Coupon Payment + Price Change) / Initial Price (20+10)/110=0.272

Yanıt Açıklaması: SML is the relationship between expected returns and beta, not standard deviation. In this regard, CML deals with portfolio risk whereas SML deals with systematic risk.

Yanıt Açıklaması: Some examples of relevant new information arriving to the market could be things like: • Announcement of the latest growth rate of the economy • Large swings in the value of the national currency • Announcement of a new contract to sell large quantity of products to another country • News of a large accident at the factory • Announcement of a new facility being built that will significantly increase the production capacity of the company

Yanıt Açıklaması: The direct labor budget is used to determine the required labor hours in order to produce the volume of products as stipulated in the production budget.