Filters
Question type
Study Flashcards

Your investment advisor has recommended your invest in bonds that pay 6.0%,compounded annually.If you invest $10,000 today,how many years will it take for your investment to grow to $30,000?


A) 12.37
B) 13.74
C) 15.27
D) 16.97
E) 18.85

F) None of the above
G) A) and C)

Correct Answer

verifed

verified

Ten years ago,Kronan Corporation earned $0.50 per share.Its earnings this year were $2.20.What was the growth rate in earnings per share (EPS) over the 10-year period?


A) 15.17%
B) 15.97%
C) 16.77%
D) 17.61%
E) 18.49%

F) A) and E)
G) None of the above

Correct Answer

verifed

verified

Cochrane Associate's net sales last year were $525 million.If sales grow at 7.5% per year,how large (in millions) will they be 8 years later?


A) $845.03
B) $889.51
C) $936.33
D) $983.14
E) $1,032.30

F) A) and D)
G) All of the above

Correct Answer

verifed

verified

Your Green Investment Tips subscription is about to expire.You plan to subscribe to the magazine for the rest of your life,and you can renew it by paying $85 annually,beginning immediately,or you can get a lifetime subscription for $850,also payable immediately.Assuming that you can earn 6.0% on your funds and that the annual renewal rate will remain constant,how many years must you live to make the lifetime subscription the better buy?


A) 7.48
B) 8.80
C) 10.35
D) 12.18
E) 14.33

F) All of the above
G) B) and E)

Correct Answer

verifed

verified

Your bank account pays a 5% nominal rate of interest.The interest is compounded quarterly.Which of the following statements is CORRECT?


A) The periodic rate of interest is 5% and the effective rate of interest is also 5%.
B) The periodic rate of interest is 1.25% and the effective rate of interest is 2.5%.
C) The periodic rate of interest is 5% and the effective rate of interest is greater than 5%.
D) The periodic rate of interest is 1.25% and the effective rate of interest is greater than 5%.
E) The periodic rate of interest is 2.5% and the effective rate of interest is 5%.

F) A) and D)
G) None of the above

Correct Answer

verifed

verified

Which of the following statements is CORRECT,assuming positive interest rates and holding other things constant?


A) Banks A and B offer the same nominal annual rate of interest, but A pays interest quarterly and B pays semiannually. Deposits in Bank B will provide the higher future value if you leave your funds on deposit.
B) The present value of a 5-year, $250 annuity due will be lower than the PV of a similar ordinary annuity.
C) A 30-year, $150,000 amortized mortgage will have larger monthly payments than an otherwise similar 20-year mortgage.
D) A bank loan's nominal interest rate will always be equal to or less than its effective annual rate.
E) If an investment pays 10% interest, compounded annually, its effective annual rate will be less than 10%.

F) A) and E)
G) A) and D)

Correct Answer

verifed

verified

Suppose Sally Smith plans to invest $1,000.She can earn an effective annual rate of 5% on Security A,while Security B has an effective annual rate of 12%.After 11 years,the compounded value of Security B should be more than twice the compounded value of Security A.(Ignore risk,and assume that compounding occurs annually.)

A) True
B) False

Correct Answer

verifed

verified

You are considering two equally risky annuities,each of which pays $15,000 per year for 20 years.Investment ORD is an ordinary (or deferred) annuity,while Investment DUE is an annuity due.Which of the following statements is CORRECT?


A) If the going rate of interest decreases from 10% to 0%, the difference between the present value of ORD and the present value of DUE would remain constant.
B) The present value of ORD must exceed the present value of DUE, but the future value of ORD may be less than the future value of DUE.
C) The present value of DUE exceeds the present value of ORD, while the future value of DUE is less than the future value of ORD.
D) The present value of ORD exceeds the present value of DUE, and the future value of ORD also exceeds the future value of DUE.
E) The present value of DUE exceeds the present value of ORD, and the future value of DUE also exceeds the future value of ORD.

F) A) and E)
G) A) and D)

Correct Answer

verifed

verified

Time lines cannot be constructed in situations where some of the cash flows occur annually but others occur quarterly.

A) True
B) False

Correct Answer

verifed

verified

What's the present value of $1,525 discounted back 5 years if the appropriate interest rate is 6%,compounded monthly?


A) $969
B) $1,020
C) $1,074
D) $1,131
E) $1,187

F) A) and C)
G) None of the above

Correct Answer

verifed

verified

Suppose you earned a $275,000 bonus this year and invested it at 8.25% per year.How much could you withdraw at the end of each of the next 20 years?


A) $28,532
B) $29,959
C) $31,457
D) $33,030
E) $34,681

F) A) and B)
G) B) and D)

Correct Answer

verifed

verified

Suppose Randy Jones plans to invest $1,000.He can earn an effective annual rate of 5% on Security A,while Security B has an effective annual rate of 12%.After 11 years,the compounded value of Security B should be somewhat less than twice the compounded value of Security A.(Ignore risk,and assume that compounding occurs annually.)

A) True
B) False

Correct Answer

verifed

verified

Disregarding risk,if money has time value,it is impossible for the future value of a given sum to exceed its present value.

A) True
B) False

Correct Answer

verifed

verified

If we are given a periodic interest rate,say a monthly rate,we can find the nominal annual rate by multiplying the periodic rate by the number of periods per year.

A) True
B) False

Correct Answer

verifed

verified

Which of the following statements is CORRECT?


A) A time line is not meaningful unless all cash flows occur annually.
B) Time lines are not useful for visualizing complex problems prior to doing actual calculations.
C) Time lines cannot be constructed to deal with situations where some of the cash flows occur annually but others occur quarterly.
D) Time lines can only be constructed for annuities where the payments occur at the end of the periods, i.e., for ordinary annuities.
E) Time lines can be constructed where some of the payments constitute an annuity but others are unequal and thus are not part of the annuity.

F) A) and E)
G) B) and C)

Correct Answer

verifed

verified

How much would $100,growing at 5% per year,be worth after 75 years?


A) $3,689.11
B) $3,883.27
C) $4,077.43
D) $4,281.30
E) $4,495.37

F) A) and C)
G) D) and E)

Correct Answer

verifed

verified

Which of the following statements is CORRECT?


A) Some of the cash flows shown on a time line can be in the form of annuity payments, but none can be uneven amounts.
B) A time line is not meaningful unless all cash flows occur annually.
C) Time lines are not useful for visualizing complex problems prior to doing actual calculations.
D) Time lines cannot be constructed in situations where some of the cash flows occur annually but others occur quarterly.
E) Time lines can be constructed for annuities where the payments occur at either the beginning or the end of the periods.

F) A) and E)
G) B) and D)

Correct Answer

verifed

verified

A "growing annuity" is any cash flow stream that grows over time.

A) True
B) False

Correct Answer

verifed

verified

As a result of compounding,the effective annual rate on a bank deposit (or a loan)is always equal to or less than the nominal rate on the deposit (or loan).

A) True
B) False

Correct Answer

verifed

verified

The greater the number of compounding periods within a year,then (1)the greater the future value of a lump sum investment at Time 0 and (2)the smaller the present value of a given lump sum to be received at some future date.

A) True
B) False

Correct Answer

verifed

verified

Showing 21 - 40 of 168

Related Exams

Exam 1

An Overview of Financial Management and the Financial Environment

46 Questions

Exam 2

Financial Statements, cash Flow, and Taxes

77 Questions

Exam 3

Analysis of Financial Statements

104 Questions

Exam 5

Bonds, bond Valuation, and Interest Rates

100 Questions

Exam 6

Risk and Return

146 Questions

Exam 7

Valuation of Stocks and Corporations

80 Questions

Exam 8

Financial Options and Applications in Corporate Finance

28 Questions

Exam 9

The Cost of Capital

92 Questions

Exam 10

The Basics of Capital Budgeting: Evaluating Cash Flows

108 Questions

Exam 11

Cash Flow Estimation and Risk Analysis

78 Questions

Exam 12

Corporate Valuation and Financial Planning

41 Questions

Exam 13

Agency Conflicts and Corporate Governance

6 Questions

Exam 14

Distributions to Shareholders: Dividends and Repurchases

58 Questions

Exam 15

Capital Structure Decisions

59 Questions

Exam 16

Supply Chains and Working Capital Management

135 Questions

Exam 17

Multinational Financial Management

49 Questions

Exam 18

Public and Private Financing: Initial Offerings, seasoned Offerings, and Investment Banks

22 Questions

Exam 18

Extension 18 A: Rights Offerings

4 Questions

Exam 19

Lease Financing

23 Questions

Exam 20

Hybrid Financing: Preferred Stock, warrants, and Convertibles

26 Questions

Exam 21

Dynamic Capital Structures

22 Questions

Exam 22

Mergers and Corporate Control

46 Questions

Exam 23

Enterprise Risk Management

14 Questions

Exam 24

Bankruptcy, reorganization, and Liquidation

12 Questions

Exam 25

Portfolio Theory and Asset Pricing Models

35 Questions

Exam 26

Real Options

11 Questions

Exam 27

Providing and Obtaining Credit

29 Questions

Exam 28

Advanced Issues in Cash Management and Inventory Control

17 Questions

Exam 29

Pension Plan Management

10 Questions

Exam 30

Financial Management in Not For Profit Businesses

10 Questions

Show Answer