Andreev exam number one PDF

Preview

Summary

Exam one every question and all the possible answers...

Description

Ba323 1. One advantage of the corporate form of organization is that: A. it avoids double taxation B. it provides unlimited protection C. Liability is limited to amount invested D. dividend payments are guaranteed 2. What's the future value of $5,400 after 5 years if the appropriate interest rate is 8%, compounded semiannually? A. $5,381.04 B. $5,794.97 C. $5.913.23 D. $7.993.32 E. $4,612.32 3 An employee has a claim on the cash flows of Goods Corp. This claim is defined as a claim by one of the firm's: A. shareholders. B. residual owners C. Financiers D. stakeholders 4. How much would $6,000 due in 15 years be worth today if the discount rate were 6.5%? A. $1,713.64 B. $2,004.96 C. $2.039.24 D. $2.332.96 E. $1,353.78 5. If given a periodic interest rate, we can find the nominal annual rate by A. Dividing the periodic rate by the number of periods per year. B. Multiplying the periodic rate by the number of periods per year. C. Compounding payments by the number of periods per year D. Calculating the effective annual rate 6. Goodness Inc.'s stock currently sells for $35.25 per share. The dividend is projected to increase at a constant rate of 6.25% per year. The required rate of return on the stock,rs, is 11.50%. What is the stock's expected price now? A. $50.71 B. $40.06 C. $45.53 D. $47.80 E. $39.15

7. The primary goal of financial management is most associated with increasing the: A. market value of the firm. B. firm's liquidity. C. dollar amount of each sale D. the fixed costs while lowering the variable costs 8. Kastle Beres has a bond outstanding with 15 years to maturity, an 7.25% nominal coupon, semiannual payments, and a $1,000 par value. The bond has a 7.50% nominal yield to maturity, but it can be called in 5 years at a price of $1,045. What is the bond's nominal yield to call? A. 4.42% B. 5.59% C. 5.54% D. 5.09% E. 8.55% 9. The standard deviation is a better measure of risk than the coefficient of variation if the expected returns of the securities being compared A. equal each other. B. differ significantly C. are provided by financial advisors D. are obtained through statistical methods 10. Suppose you have $850 and plan to purchase a 5-year certificate of deposit (CD) that pays 3.5% interest, compounded annually. How much will you have when the CD matures? A. $1,009.53 B. S888.39 C. $858.10 D. $837.91 E. $777.34 11. Company's stock has a beta of 1.32, its required return is 12.75%, and the risk-free rate is 2.30%. What is the required rate of return on the market? Do not round your intermediate calculations A. 10.22% B. 12.38% C. 9.98% D. 8.19% E. 7.69% 12. Malko Enterprises' bonds currently sell for $1,050. They have a 6-year maturity: an annual coupon of $85, and a part value of $1,000. What is their current yield? A. 7.35%

B. C. D. E.

6.40% 8.10% 6.91% 6.62%

13. What's the present value of $4,500 discounted back 5 years if the appropriate interest rate is 3.5%, compounded semiannually? A. $3,602.30 B. $3,788.88 C. $4,178.66 D. $4,070.59 E. $4,358.78 14. Investor has a chance to buy an annuity that pays $2,550 at the beginning of each year for 4 years. She could earn 5.5% on your money in other investments with equal risk. What is the most you should pay for the annuity? A. $7,531.36 B. $9,429.73 C. $8,298.45 D. $6,973.48 E. $8,228.71 15. Which of the following actions would be most likely to reduce potential conflicts of interest between stockholders and bondholders? A. Compensating managers with stock options. B. Financing risky projects with additional debt. C. Abolishing the Security and Exchange Commission. D. The threat of hostile takeovers. E. The use of covenants in bond agreements that limit the firm's use of additional debt and constrain managers’ actions. 16. Your aunt is about to retire, and she wants to sell some of her stock and buy an annuity that will provide her with income of $90,000 per year for 30 years, beginning a year from today. The going rate on such annuities is 8.25%. How much would it cost her to buy such an annuity today? A. $1,172,844.91 B. $1,149,847.96 C. $989,762.46 D. $1,241,835.79 E. $1,333,823.63 17. Assume that you are considering the purchase of a 20-year, noncallable bond with an annual coupon rate of 8.5%. The bond has a face value of $1,000, and it makes semiannual interest payments. If you require an 10.7% nominal yield to maturity on this investment, what is

the maximum price you should be willing to pay for the bond? A. $819.96 B. $823.25 C. $901.80 D. $910.81 18. Your bank account pays an 8 nominal rate of interest. The interest is compounded semiannually. Which of the following statements is CORRECT A. The periodic rate of interest is 8% and the effective rate of interest is greater than 8%. B. The periodic rate of interest is 4% and the effective rate of interest is greater than 8%. C. The periodic rate of interest is 2% and the effective rate of interest is greater than 8%. D. The periodic rate of interest is 8% and the effective rate of interest is also 8%. E. The periodic rate of interest is 2% and the effective rate of interest is 4%.

19. Suppose the U.S, treasury offers to sell you a bond for $3,000, No payments will be made until the bond matures 10 years from now, at which time it will be redeemed for $4,100. What interest rate would you earn if you bought this bond at the offer price? A. 3.20% B. 2.38% C. 3.17% D. 3.27% E. 3.55% 20. Ryngaert Inc. recently issued noncallable bonds that mature in 15 years. They have a par value of $1,000 and an annual coupon of 5.7%. If the current market interest rate is 7.0%, at what price should the bonds sell? A. $881.60 B. $775.81 C. $1,013.84 D. $1,040.28 E. $802.25

21. Thettuce Company just paid a dividend of $0.75 per share, and that dividend is expected to grow at a constant rate of 6.50% per year in the future. The company's beta is 1.75, the market risk premium is 6.00%, and the risk-free rate is 4.00%. What is the company's current stock price, Po? Do not round intermediate calculations. A. $9.89 B. $9.98 C. $10.19 D. $7.52 E. $10.98

22. You want to buy a snowmobile 2 years from now, and you plan to save $4,600 per year, beginning one year from today. You will deposit your savings in an account that pays 6.5% interest. How much will you have just after you make the 2nd deposit, 2 years from now? A. $13,197 B. $11,396 C. $12,933 D. $13,461 E. $9,499 23. You recently sold 200 shares of Disney stock, and the transfer was made through a broker. This is an example of. A. A primary market transaction. B. A secondary market transaction C. A futures market transaction. D. An over-the-counter market transaction E. A money market transaction. 24. Cheng Inc. is considering a capital budgeting project that has an expected return of 42% and a standard deviation of 30%. What is the project's coefficient of variation? Do not round your intermediate calculations A. 140 B. 1.08 C. 1.03 D. 1.25 E. 0.99 25. DEED Inc.. has an preferred stock outstanding with an annual dividend of $1.75 per share. If the required return on this preferred stock is 5.5%, at what price should the stock sell? A. $31.82 B. $23.38 C. 32.92 D. $30.77 E. $38.15 26. Which of the following bank accounts has the highest effective annual return? A. An account that pays 8% nominal interest with annual compounding B. An account that pays 7% nominal interest with daily (365-day) compounding. C. An account that pays 8% nominal interest with daily (365-day) compounding D. An account that pays 8% nominal interest with monthly compounding. E. An account that pays 7% nominal interest with monthly compounding. 27. Suppose your credit card issuer states that it charges a 22.00% nominal annual rate, but

you must make monthly payments. What is the effective annual rate? A. 26.29% B. 26.82% C. 24.36% D. 29.51% E. 31.12% 28. Lost Inc.'s stock has a 50% chance of producing a 16% return, a 30% chance of producing a -10% return, and a 20% chance of producing a 28% return. What is the firm's expected rate of return? Do not round your intermediate calculations. A. 10.60% B. 15.71% C. 15.86% D. 15.40% E. 14.01% 29. Investor paid $9,500 for an investment that promises to pay $850 at the end of each of the next 5 years, then an additional lump sum payment of $10,750 at the end of the 5th year. What is the expected rate of return on this investment? A. 11.06% B. 7.93% C. 3.16% D. 8.83% E. 8.39% 30. MU Rentals has a beta of 1.70, the real risk-free rate is 2.00%, investors expect a 3.00% future inflation rate, and the market risk premium is 4.50%. What is company's required rate of return? Do not round your intermediate calculations. A. 7.96% B. 6.47% C. 8.29% D. 7.30% E. 12.65%...