Q&A Hero

Q: A stock has a beta of 1.3. The systematic risk of this stock is ____________ the stock market as a whole. A. higher than B. lower than C. equal to D. indeterminable compared to

Q: Assume that a monopoly is producing at a profit -maximizing output level. If the firmʹs total fixed costs decrease, the firmA) should lower its price.B) should increase its price.C) should continue to produce at the same level. D) increase its output level.

Q: The Deferred Revenue account in government accounting is frequently used forA) taxes billed that are not expected to be collected within 60 days of the fiscal year end.B) taxes billed that are not expected to be collected based on a bad debt percentage history.C) taxes that are to be remitted from another government agency in the second month before the fiscal year end.D) taxes that are to be remitted from another government agency in the first month after the fiscal year end.

Q: In a long-run perfectly competitive equilibrium,A) P = MR = MC > ATC. B) P = MR > MC = ATC. C) P = MR = MC = ATC. D) P > MR > MC = ATC.

Q: Research has identified two systematic factors that affect U.S. stock returns. The factors are growth in industrial production and changes in long-term interest rates. Industrial production growth is expected to be 3%, and long-term interest rates are expected to increase by 1%. You are analyzing a stock that has a beta of 1.2 on the industrial production factor and .5 on the interest rate factor. It currently has an expected return of 12%. However, if industrial production actually grows 5% and interest rates drop 2%, what is your best guess of the stock's return? A. 15.9% B. 12.9% C. 13.2% D. 12%

Q: Assume you are preparing journal entries for the General Fund. What account should be debited when office supplies are ordered?A) AppropriationsB) EncumbrancesC) ExpendituresD) Other financing use

Q: Marginal revenue isA) change in total revenue/change in output.B) total revenue/output.C) change in total revenue/output.D) total revenue/change in output.

Q: What is the expected return on a stock with a beta of .8, given a risk-free rate of 3.5% and an expected market return of 15.5%? A. 3.8% B. 13.1% C. 15.6% D. 19.1%

Q: Which of the following funds has similar accounting and reporting to the special revenue fund?A) The proprietary fundB) The trust fundC) The general fundD) The agency fund

Q: According to the CAPM, what is the expected market return given an expected return on a security of 15.8%, a stock beta of 1.2, and a risk-free interest rate of 5%?A. 5%B. 9%C. 13%D. 14%

Q: Which of the following is true?A) The MC curve intersects AFC at its minimum point. B) If MC is below AVC, AVC must be increasing.C) If MC is above ATC, ATC must be increasing. D) None of the above.

Q: Taxes which were billed, but are not paid by the due date, require which of the following entries at the fiscal close?A) Debit Taxes Receivable - DelinquentB) Debit Allowance for Uncollectible Taxes - DelinquentC) Credit Taxes Receivable - DelinquentD) Credit Allowance for Uncollectible Taxes - Current

Q: The best way to think of the short run and the long run is as A) specific periods of time, although the time periods may differ across industries. B) planning terms that apply to managers. C) concepts that apply to all people who work for a firm. D) a concept that only accountants are concerned with.

Q: 6 = 4 + 1.2 (MRP); MRP = 8%

Q: At any point in time, a government will be able to spend an amount equal toA) appropriations minus expenditures.B) appropriations minus expenditures minus encumbrances.C) appropriations minus encumbrances.D) expenditures minus encumbrances.

Q: According to the CAPM, what is the market risk premium given an expected return on a security of 13.6%, a stock beta of 1.2, and a risk-free interest rate of 4%?A. 4%B. 4.8%C. 6.6%D. 8%

Q: A person starts her own business. She quits her $40,000 a year job, rents an office for $15,000 a year, pays wages and salaries of $50,000 a year, utilities of $4,000 a year, and materials of $20,000. She uses her own car for sales work rather than leasing an equivalent car for $6000 a year. If revenues are $140,000, her accounting profit and economic profit are respectivelyA) $45,000 and $11,000. B) $45,000 and $5000. C) $51,000 and $5000. D) $51,000 and $45,000.

Q: Which of the following represents the recording of a budget in the accounts of the General Fund?A) Debit Appropriations, Credit Estimated Revenues and Credit Fund Balance - UnassignedB) Debit Appropriations, Credit Estimated RevenuesC) Debit Estimated Revenues, Credit Appropriations, Credit Estimated Other Financing Uses, Credit Fund Balance - UnassignedD) Debit Estimated Other Financing Uses, Credit Appropriations and Credit Fund Balance - Unassigned

Q: If the beta of the market index is 1 and the standard deviation of the market index increases from 12% to 18%, what is the new beta of the market index? A. .8 B. 1 C. 1.2 D. 1.5

Q: Using the above figure, we can conclude thatA) the consumer will purchase goods at combination M.B) the consumer is indifferent between J and M. C) K is the optimal combination of goods.D) L is preferred to K.

Q: Governments must record a liability for uncollected taxes instead of revenues for uncollected taxes if the taxes are going to be collectedA) 30 days after the fiscal year end.B) 45 days after the fiscal year end.C) 60 days after the fiscal year end.D) 120 days after the fiscal year end.

Q: The expected return on the market is the risk-free rate plus the _____________. A. diversified returns B. equilibrium risk premium C. historical market return D. unsystematic return

Q: Glasses of WaterTotal UtilityMarginal Utility1100 2175 3225 4250 5260 6255 Using the above table, the marginal utility for the sixth glass of water isA) -5 utils. B) 255 utils. C) 5 utils. D) 260 utils.

Q: If the cross price elasticity of demand between two commodities is positive, then these commodities areA) are superior. B) are complements. C) are substitutes. D) are inferior.

Q: The proper sequence of events isA) purchase order, appropriation, encumbrance, expenditure.B) purchase order, encumbrance, expenditure, appropriation.C) appropriation, encumbrance, purchase order, expenditure.D) appropriation, purchase order, encumbrance, expenditure.

Q: Two investment advisers are comparing performance. Adviser A averaged a 20% return with a portfolio beta of 1.5, and adviser B averaged a 15% return with a portfolio beta of 1.2. If the T-bill rate was 5% and the market return during the period was 13%, which adviser was the better stock picker? A. Advisor A was better because he generated a larger alpha. B. Advisor B was better because she generated a larger alpha. C. Advisor A was better because he generated a higher return. D. Advisor B was better because she achieved a good return with a lower beta.

Q: Use the following information to answer the question(s) below.The town of Mayberry receives a gift of $500,000 in bonds. The contributor instructs that the principal should remain intact, but the annual interest income of $50,000 can be used for the maintenance of the zoo animals.When the interest income of $50,000 is received, what account should be credited?A) Other Financing SourcesB) Other Financing UsesC) Deferred RevenueD) Revenue

Q: If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below is possible? Consider each situation independently, and assume the risk-free rate is 5%.A. Option AB. Option BC. Option CD. Option D

Q: If the price of a cola increased by 12 % and consumers responded by purchasing 20 % less cola, the absolute value of price elasticity of demand for cola would beA) 0.20. B) 0.80. C) 1.67.D) 1.80.

Q: A farmer notices that a neighboring rancherʹs cattle are wandering and destroying some of his crops. The farmer decides to offer a payment to the rancher if the rancher will reduce the size of his herd. By doing so, the farmer A) can be sure that the size of the herd will be reduced and the size of his own harvest will be increased. B) indicates to the rancher that there is an opportunity cost to the wandering of the cattle, and thereby internalizes the externality. C) inadvertently bears the costs of the externality when the rancher should be liable for the costs. D) informs the rancher that the cattle have destroyed crops, which should induce the farmer to build a fence in order to maintain good relations.

Q: What is the alpha of a portfolio with a beta of 2 and actual return of 15%?A. 0%B. 13%C. 15%D. 17%

Q: What is the expected return for a portfolio with a beta of .5?A. 5%B. 7.5%C. 12.5%D. 15%

Q: Other things being equal, a national health insurance program would A) generate higher life expectancies and lower infant mortality rates. B) generate lower life expectancies and higher infant mortality rates. C) increase total health care expenditures.D) increase the quality of life.

Q: What statements are required for Government-wide financial statements?A) Statement of Cash Flows and Balance SheetB) Statement of Cash Flows and Statement of Net AssetsC) Statement of Net Assets and Statement of ActivitiesD) Operating Statement and Balance Sheet

Q: What is the beta for a portfolio with an expected return of 12.5%?A. 0B. 1C. 1.5D. 2

Q: In a Lorenz curve, perfect income equality is represented byA) a vertical line.B) a horizontal line.C) a rectangular hyperbola.D) a 45-degree line originating from the origin.

Q: The General Fund transfers $50,000 cash to the Debt Service Fund to meet annual interest payments. What entry did the Debt Service Fund prepare?A) Debit Cash $50,000, Credit Revenue $50,000B) Debit Cash $50,000, Credit Other Financing Sources-Transfer from General Fund $50,000C) Debit Encumbrance $50,000, Credit Due to General Fund $50,000D) Debit Appropriation $50,000, Credit Reserve for Encumbrance $50,000

Q: What is the expected return on the market?A. 0%B. 5%C. 10%D. 15%

Q: The Taft-Hartley Act made all of the following illegal EXCEPT A) jurisdictional disputes.B) the Congress of Industrial Organizations. C) make-to-work laws.D) closed shops.

Q: The proceeds from a bond issuance for the construction of a new public school should be recorded in the ________ fund at the time the bonds are sold. At the time of the bond issue, the debit is to cash and the credit is to ________.A) capital projects; revenuesB) general; bonds payableC) general; other financing sourcesD) capital projects; other financing sources

Q: Assume that both X and Y are well-diversified portfolios and the risk-free rate is 8%. Portfolio X has an expected return of 14% and a beta of 1. Portfolio Y has an expected return of 9.5% and a beta of .25. In this situation, you would conclude that portfolios X and Y _________. A. are in equilibrium B. offer an arbitrage opportunity C. are both underpriced D. are both fairly priced

Q: The price elasticity of demand for labor will depend upon all but theA) price elasticity of demand for the final product. B) price elasticity of supply for the final product. C) time period being considered.D) availability of substitutes for inputs.

Q: When a city enters into a capital lease for a fixed asset for the general government,A) government-wide statements will report an Encumbrance for the leased asset.B) government-wide statements will report the liability, Capital Lease Obligation.C) governmental fund statements will report a fixed asset.D) governmental fund statements will report a liability, Capital Lease Obligation.

Q: The Sherman Antitrust Act was passed toA) protect companies from foreign competition. B) protect the monopoly profits of firms.C) control the growth of monopolies in the U.S.D) prevent market price from equaling marginal cost.

Q: The expected return on the market portfolio is 15%. The risk-free rate is 8%. The expected return on SDA Corp. common stock is 16%. The beta of SDA Corp. common stock is 1.25. Within the context of the capital asset pricing model, _________.A. SDA Corp. stock is underpricedB. SDA Corp. stock is fairly pricedC. SDA Corp. stock's alpha is -.75%D. SDA Corp. stock alpha is .75%

Q: When recording an approved budget into the accounts of the general fund, which of the following accounts would be credited?A) AppropriationsB) EncumbrancesC) Estimated revenuesD) Deferred revenues

Q: You run a regression of a stock's returns versus a market index and find the following:Based on the data, you know that the stock _____.A. earned a positive alpha that is statistically significantly different from zeroB. has a beta precisely equal to .890C. has a beta that is likely to be anything between .6541 and 1.465 inclusiveD. has no systematic risk

Q: In which market structures do firms earn long -term profits of zero? A) Perfect competition and monopolistic competition B) Monopolistic competition and oligopoly C) Oligopoly and monopoly D) Perfect competition and monopoly

Q: The estimated revenues control account of Metro City's general fund is created whenA) the city's tax receipts are measurable and available.B) the budget is recorded in the accounting records.C) encumbrances are made.D) taxes are levied and bills are mailed.

Q: One of the main problems with the arbitrage pricing theory is __________. A. its use of several factors instead of a single market index to explain the risk-return relationship B. the introduction of nonsystematic risk as a key factor in the risk-return relationship C. that the APT requires an even larger number of unrealistic assumptions than does the CAPM D. the model fails to identify the key macroeconomic variables in the risk-return relationship

Q: Which of the following is not true of an oligopoly?A) They advertise their product.B) The firms recognize their interdependence.C) A few firm account for a large portion of the total output.D) Firms are price takers.

Q: When a capital lease is used to lease fixed assets for the general government, the governmental fund acquiring the fixed assets debits ________ at the ________.A) expenditures; future value of the minimum lease paymentsB) fixed assets; future value of the minimum lease paymentsC) expenditures, present value of the minimum lease paymentsD) fixed assets; present value of the minimum lease payments

Q: Standard deviation of portfolio returns is a measure of ___________. A. total risk B. relative systematic risk C. relative nonsystematic risk D. relative business risk

Q: In the short run, a firm operating as a monopolistic competitor will produce to the point at whichA) MR = ATC. B) MC = ATC. C) P = MC. D) MR = MC.

Q: The following are transactions for the city of Salem.a. Incurred salaries of $44,000 to be paid next month.b. Tax bills totaling $500,000 mailed to city residents.c. Paid salaries above.d. Computer equipment received in the amount of $11,000, to be paid in 30 days.Required:Analyze the above transactions by using the accounting equation for a proprietary fund.

Q: The measure of unsystematic risk can be found from an index model as _________. A. residual standard deviation B. R-square C. degrees of freedom D. sum of squares of the regression

Q: A monopolist is producing at an output level at which ATC = $5, P = $6, MC = $4, and MR = $3.We can conclude thatA) economic profit could be increased by producing more.B) economic profit could be increased by producing less. C) economic profit cannot be increased.D) the firm is earning $10 in economic profits.

Q: A stock's alpha measures the stock's ____________________. A. expected return B. abnormal return C. excess return D. residual return

Q: For a perfectly competitive firm at its long -run competitive equilibrium point,A) P = AR = MR = LATC = SATC = MC. B) P = AR = MR = LATC > SATC = MC. C) P = AR = MR = MC = LATC = AVC. D) P > MR > AR > MC > LATC > SATC.

Q: Match the following definitions to the appropriate government accounting terms (numbered below).A. Legally separate organization for which primary government is financially accountableB. The use of governmental fund working capitalC. Appropriation for a specific time periodD. Governmental and Proprietary fund revenues and expenses presented using full accrual accountingE. Approved or authorized expendituresF. Revenues recognized when available to meet current obligationsG. Self-balancing set of accountsH. Each state government and each general-purpose local governmentI. The responsibility to demonstrate compliance with public decisions with regard to the use of financial resourcesJ. Governmental and Internal Service Funds assets and liabilities presented together_____1. Modified Accrual Basis_____2. Fund_____3. Primary Government_____4. Appropriation_____5. Statement of Net Assets_____6. Fiscal Accountability_____7. Allotment_____8. Component Unit_____9. Statement of Activities_____10. Expenditures

Q: Which of the following is always true in the short run for a perfectly competitive firm that is maximizing economic profits?A) P = d = MR = MC = AVC B) P = d = MR = MC C) P = d = MR = Q D) MR = MC = Q

Q: Arbitrage is __________________________. A. an example of the law of one price B. the creation of riskless profits made possible by relative mispricing among securities C. a common opportunity in modern markets D. an example of a risky trading strategy based on market forecasting

Q: Using the revenue types shown below, match each of the revenue sources to a revenue type. Each revenue type may be used more than once.A. Derived Tax RevenuesB. Imposed Nonexchange RevenuesC. Government-Mandated Nonexchange TransactionsD. Voluntary Nonexchange Transactions_____1. Corporate income tax_____2. Sales taxes_____3. Liquor taxes_____4. Fines and penalties paid to a government entity_____5. Cigarette taxes_____6. Personal income tax_____7. Donation made to a government entity_____8. Motor fuel tax_____9. Property tax

Q: The most significant conceptual difference between the arbitrage pricing theory (APT) and the capital asset pricing model (CAPM) is that the CAPM _____________. A. places less emphasis on market risk B. recognizes multiple unsystematic risk factors C. recognizes only one systematic risk factor D. recognizes multiple systematic risk factors

Q: In the table below, what are the marginal costs of the fourth unit of output?A) $10,000 B) $20,000 C) $30,000 D) $40,000

Q: The following are transactions for the city of Greenville.a. Issued $50,000 10-year bonds.b. Used $30,000 of the cash to buy a truck.c. Sold the truck that was replaced which had cost $28,000, for $2,000. The old truck was fully depreciated. Residual value is zero.d. Computed depreciation on the new truck for the year of $6,000.Required:Analyze the above transactions by using the accounting equation for a proprietary fund.

Q: According to the CAPM, investors are compensated for all but which of the following? A. expected inflation B. systematic risk C. time value of money D. residual risk

Q: For a wheat farmer in the middle of harvesting system, a fixed input would beA) workers hired. B) combines rented.C) the land that had been planted. D) trucks rented to haul the wheat.

Q: The expected return of the risky-asset portfolio with minimum variance is _________. A. the market rate of return B. zero C. the risk-free rate D. The answer cannot be determined from the information given.

Q: Any business wanting to attract financial capital must expect toA) earn a positive economic profit.B) keep implicit costs as close to zero as possible. C) pay a normal rate of return.D) pay a below normal rate of return in order to make a positive rate of return itself.

Q: The following are transactions for the city of Clinton.a. Borrowed $100,000 by issuing a one-year, 5% note, three months before year-end.b. Accrued interest at year end, but did not pay the interest at year end.c. Charges for services rendered of $2,500 were billed and collected immediately.d. Incurred salary costs of $5,000, unpaid.Required:Analyze the above transactions by using the accounting equation for a proprietary fund.

Q: According to capital asset pricing theory, the key determinant of portfolio returns is _________. A. the degree of diversification B. the systematic risk of the portfolio C. the firm-specific risk of the portfolio D. economic factors

Q: An increase in income willA) shift the budget constraint to the right.B) make the budget constraint steeper. C) make the budget constraint flatter.D) make the budget constraint more bowed.

Q: Beta is a measure of ______________. A. total risk B. relative systematic risk C. relative nonsystematic risk D. relative business risk

Q: Glasses of WaterTotal UtilityMarginal Utility1100 2175 3225 4250 5260 6255 Using the above table, diminishing marginal utility begins after the glass of water is consumed.A) 1st B) 2nd C) 6th D) 5th

Q: For each of the following events or transactions, identify the type of fund(s) that will be affected.1. A central purchasing department was established to handle all the purchasing needs of a county government.2. A county government levies sales taxes restricted as to use for job creation.3. A county government receives a large contribution specifying that income from the contribution be distributed each year to the county zoo. The principal is to remain intact indefinitely.4. A city government paid construction costs of $12,000 on city hall building.5. A city government paid general operating costs.

Q: Liquidity is a risk factor that __________. A. has yet to be accurately measured and incorporated into portfolio management B. is unaffected by trading mechanisms on various stock exchanges C. has no effect on the market value of an asset D. affects bond prices but not stock prices

Q: If the price of one good increases, and as a result the demand for another good increases, the goods areA) substitutes. B) normal goods. C) complements. D) inferior goods.

Q: The SML is valid for _______________, and the CML is valid for ______________. A. only individual assets; well-diversified portfolios only B. only well-diversified portfolios; only individual assets C. both well-diversified portfolios and individual assets; both well-diversified portfolios and individual assets D. both well-diversified portfolios and individual assets; well-diversified portfolios only

Q: For each of the following events or transactions, identify the fund or funds that will be affected.1.A city government charges a fee for the use of the municipal golf course.2. Interest is paid on state government revenue bonds.3. A motor pool was established to handle the vehicle needs of a county government.4. Paid salaries for general governmental employees.5. Accrued salaries for general governmental employees.