Here are 15 multiple choice questions at the university level about investing and corporate finance:
Investing
1. What is the difference between a stock and a bond?
o (A) A stock represents ownership in a company, while a bond is a loan to a company or government.
o (B) Stocks are riskier than bonds, but have the potential for higher returns.
o (C) Bonds are more liquid than stocks, meaning they can be sold more easily.
o (D) All of the above.
2. What is the difference between primary and secondary markets?
o (A) Primary markets are where new securities are issued, while secondary markets are where existing securities are traded.
o (B) Primary markets are more regulated than secondary markets.
o (C) Primary markets are for large institutional investors, while secondary markets are for individual investors.
o (D) None of the above.
3. What is the capital asset pricing model (CAPM)?
o (A) A model for estimating the expected return of a security based on its beta and the market risk premium.
o (B) A model for estimating the cost of capital for a company.
o (C) A model for valuing stocks.
o (D) All of the above.
Corporate Finance
4. What is the goal of corporate finance?
o (A) To maximize shareholder wealth.
o (B) To minimize the cost of capital.
o (C) To make sound investment decisions.
o (D) All of the above.
5. What are the three main types of capital budgeting decisions?
o (A) Independent, mutually exclusive, and contingent.
o (B) Short-term, medium-term, and long-term.
o (C) Operating, investing, and financing.
o (D) None of the above.
6. What is the weighted average cost of capital (WACC)?
o (A) The average cost of capital for a company, weighted by the proportion of each type of capital in the company's capital structure.
o (B) The minimum rate of return that a company must earn on its investments in order to avoid losing money.
o (C) The discount rate used to evaluate capital budgeting projects.
o (D) All of the above.
Challenge Questions
7. Discuss the different types of investment risks.
8. How can investors diversify their portfolios to reduce risk?
9. What are some of the key factors to consider when making capital budgeting decisions?
10.How can companies use financial leverage to increase their returns?
11.What are some of the ethical considerations involved in corporate finance?
I hope these questions are helpful!
