Financial Management

✅ The correct answer is B.
In arbitrage pricing theory, higher required rate of return and higher dividend is usually paid on stock. The Arbitrage Pricing Theory (APT) is a theory of asset pricing that holds that an asset’s returns can be forecasted with the linear relationship of an asset’s expected returns and the macroeconomic factors that affect the asset’s risk.

✅ The correct answer is C.
Financial security issued by banks operating outside U.S is classified as Eurodollar market deposits. Eurodollars are time deposits denominated in U.S. dollars at banks outside the United States, and thus are not under the jurisdiction of the Federal Reserve.

✅ The correct answer is A.
Type of financial security in which firms do not borrow money rather lease their assets is classified as leases. A lease is a contract outlining the terms under which one party agrees to rent property owned by another party.

✅ The correct answer is A.
In expected rate of return for constant growth, stock price must grow according to an expected rate and at same price. The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR).

✅ The correct answer is D.
In capital asset pricing model, assumptions must be followed including no taxes, no transaction costs and fixed quantities of assets.

✅ The correct answer is B.
An unlimited liability is classified as liabilities of the general partners. A general partnership is a business arrangement by which two or more individuals agree to share in all assets, profits and financial and legal liabilities of a jointly-owned business structure.

✅ The correct answer is A.
Stockholders that do not get benefits even if company’s earnings grow are classified as preferred stockholders. Preferred shareholders have priority over common stockholders when it comes to dividends, which generally yield more than common stock and can be paid monthly or quarterly.

✅ The correct answer is A.
Book value per share is equal to (common shareholders’ equity/common shares outstanding). The term “book value” is a company’s assets minus its liabilities and is sometimes referred to as stockholder’s equity, owner’s equity, shareholder’s equity, or simply equity.

✅ The correct answer is D.
Neural networks uses a computer program in an attempt to imitate the brain in analysing securities. A neural network is a series of algorithms that endeavors to recognize underlying relationships in a set of data through a process that mimics the way the human brain operates.

✅ The correct answer is A.
For investors, steeper slope of indifference curve shows more risk averse investor. A risk averse investor is an investor who prefers lower returns with known risks rather than higher returns with unknown risks. In other words, among various investments giving the same return with different level of risks, this investor always prefers the alternative with least interest.