Financial Management - Study Mode

[#646] Investment bankers perform the following role ___________.
Correct Answer

(D) all of the above

Explanation

Solution: Option A: market new stock and bond issues for firms - Investment bankers act like a bridge between companies that need to raise money and investors who want to invest. They help companies sell (or market ) new stocks (shares of ownership) and bonds (loans to the company) to the public. Think of them as the company's sales team for raising capital. Option B: provide advice to the firms as to market conditions, price, etc - Investment bankers are experts in the financial markets. They give companies advice on things like: * Market Conditions: Is it a good time to sell stocks or bonds? What are investors looking for right now? * Price: How much should we charge for each share of stock or bond? (They want to get the best price for the company!) Option C: design securities with desirable properties - Investment bankers don't just sell existing stocks and bonds. They can also help companies create (or design ) new types of stocks or bonds with specific features ( desirable properties ) that might attract investors. For example, they might create a bond that pays a higher interest rate or a stock that pays a dividend. Since investment bankers perform all these roles, the answer is Option D: all of the above .

[#647] Which of the following is the assumption of the MM model on dividend policy?
Correct Answer

(C) The firm has an infinite life

Explanation

Solution: The firm has an infinite life is the assumption of the MM model on dividend policy. According to Miller and Modigliani Hypothesis or MM Approach, dividend policy has no effect on the price of the shares of the firm and believes that it is the investment policy that increases the firm’s share value.

[#648] Investors seeking to avoid actively managing their portfolios will prefer which of the following assets?
Correct Answer

(B) Commercial bank deposits

Explanation

Solution: Investors seeking to avoid actively managing their portfolios will prefer Commercial bank deposits. A commercial bank accepts deposits in the form of current, savings and fixed deposits.

[#649] Which of the following short term securities is inappropriate for an individual, desiring funds for financial emergencies?
Correct Answer

(C) financial futures

Explanation

Solution: Financial futures short term securities is inappropriate for an individual, desiring funds for financial emergencies. Futures contract to buy or sell a specific financial instrument (such as treasury bills, certificates of deposit, or foreign currencies) at a specific future date and at a specified price. The market value of these contracts generally moves in a direction opposite to that of the interest rates.

[#650] Which of the following methods does a firm resort to avoid dividend payments?
Correct Answer

(B) Declaring bonus shares

Explanation

Solution: Declaring bonus shares methods does a firm resort to avoid dividend payments. Bonus shares are shares distributed by a company to its current shareholders as fully paid shares free of charge. to capitalise a part of the company's retained earnings.