    At a time in their career when veteran finance chiefs are huddling with their CEOs on strategy, wooing institutional investors, and finding new markets, do their technical skills remain rust-free? Is their basic finance knowledge still accessible at a finger snap? The Corporate Finance Institute puts forth the following questions as examples of what young finance professionals need to know. Can you score 100% on this test? No cheating!

1. Which of the following is a simple formula to calculate cost of capital?
A. total assets/net debt x cost of
debt + total assets/equity x cost of equity
B. net debt/equity x cost of debt + equity/net debt x cost of equity
C. net debt x cost of debt + equity x cost of equity
D. net debt/total assets x cost of
debt + equity/total assets x cost of equity

2. The correct order of a capital stack from the most to least secured is:
A. equity > subordinated debt > senior debt
B. subordinated debt > senior debt > equity
C. senior debt > subordinated debt > equity
D. senior debt > equity > subordinated debt

3. The formula for calculating future value (FV) is:
A. FV = PV/(1+r)^n
B. FV = PV/(1+r)*n
C. FV = PV x (1+r)^n
D. FV = PV x (1+r)*n

4. What is the enterprise value of a business?
A. The market value of its equity
B. The book value of its equity
C. The entire value of the business without giving consideration to its capital structure
D. The entire value of the business considering its capital structure

5. Which of the following is true when a bond is trading at a discount?
A. Coupon Rate > Current Yield > Yield to Maturity
B. Coupon Rate < Current Yield < Yield to Maturity
C. Coupon Rate = Current Yield = Yield to Maturity
D. Coupon Rate < Current Yield = Yield to Maturity

6. ________ underwriting is when the underwriter agrees to buy the entire issue and assume full financial responsibility for any unsold shares.
A. Best-efforts
B. Firm-commitment
C. All-or-none
D. Full-purchase

7. The concept of present value relates to the idea that:
A. The discount rate is always higher when you invest now than in the future
B. The discount rate is always higher when you invest in the future than now
C. The money you have now is worth less today than an identical amount you would receive in the future
D. The money you have now is worth more today than an identical amount you would receive in the future

Answers: 1-D; 2-C; 3-C; 4-C; 5-B; 6-B; 7-D