Finance Quiz

What is the future value of $1,000 invested today at an annual interest rate of 5% for 3 years?

• $1,150

• $1,157.63

• $1,200

• $1,215.51

Which financial statement provides a snapshot of a company's financial position at a specific point in time?

• Income Statement

• Cash Flow Statement

• Balance Sheet

• Statement of Retained Earnings

Which of the following is a commonly used method for evaluating capital investment projects?

• Net Present Value (NPV)

• Gross Profit Margin

• Operating Leverage

• Working Capital Ratio

If a company's dividend is expected to grow at a constant rate of 4% per year and the required rate of return is 8%, what is the value of a stock that just paid a $2 dividend?

• $25

• $50

• $52

• $54

Which of the following statements is true about the relationship between risk and return?

• Higher risk always leads to higher returns

• Higher risk generally requires a higher potential return to be considered acceptable

• Lower risk always results in lower returns

• Risk and return are unrelated

A bond with a face value of $1,000, an annual coupon rate of 6%, and 10 years to maturity is selling for $950. What is its yield to maturity (YTM)?

• Less than 6%

• Exactly 6%

• More than 6%

• It cannot be determined from the information given

According to the Efficient Market Hypothesis (EMH), which of the following statements is true?

• It is impossible to consistently achieve higher returns than the overall market

• Stock prices always reflect their intrinsic value

• All investors have access to all relevant information at the same time

• Market efficiency means that stock prices are always stable

What is a derivative in the context of finance?

• A type of stock that pays dividends

• A financial instrument whose value is derived from the value of another asset

• A type of bond with a variable interest rate

• A financial statement showing the company's liabilities

What is the primary goal of financial management in a corporation?

• Maximizing sales revenue

• Minimizing operational costs

• Maximizing shareholder wealth

• Maximizing employee benefits

Why is diversification important in portfolio management?

• It increases the overall return by investing in only one type of asset

• It reduces risk by spreading investments across different assets

• It guarantees a profit in all market conditions

• It eliminates the need for a financial advisor