The annual effective rate of interest is a function of:
A.the annual nominal rate of interest.
B.the number of compounding intervals per year.
C.the imbedded annuity.
D.a and b
Large, strong companies frequently resort to commercial paper as a source of
short-term funds because:
A.commercial paper dealers and lenders are flexible about repayment terms.
B.commercial paper is normally cheaper than other sources of short-term credit.
C.interest rates on commercial paper are very stable.
D.All of the above
PanAfrica Construction bought a small crane ten years ago for $140,000. The crane is
being depreciated over a 15-year life to a salvage value of $20,000. PanAfrica pays
taxes equal to 40 percent of ordinary income and capital gains. What is the tax liability
(or saving) if the crane is sold now for $92,000?
A.$36,800
B.($8,000)
C.$12,800
D.$56,000
Pledging accounts receivable:
A.is similar to factoring in that the receivables no longer belong to the borrowing firm.
B.may involve recourse which means that the borrower is responsible for losses from
uncollectible accounts.
C.always requires the lender to review each account individually and determine which
ones are creditworthy before agreeing to a loan.
D.is a relatively inexpensive form of financing.
E.All of the above are correct regarding pledging accounts receivable.
Which of the following constitute the interest rate model?
A.k = risk free rate + inflation adjustment + default risk premium + liquidity risk
premium
B.k = basic rate + default risk premium + liquidity risk premium + maturity risk
premium + government risk premium
C.k = pure rate + inflation adjustment + default risk premium + liquidity risk premium
+ maturity risk premium
D.None of the above
Berry Corp. issued a $1,000 bond with a 14% coupon paid semiannually. It has a yield
to maturity of 11%. The bond matures in 15 years. However, it is callable in 10 years
with a call premium of one year’s interest. What is the bond’s yield to call if it is
purchased today at a price determined by its yield to maturity?
A.5.40%
B.5.56%
C.8.65%
D.10.79%
E.11.13%
When a receivable is written off as uncollectible, entries will usually be made into
which accounts?
A.Bad debt reserve
B.Bad debt expenses
C.Accounts receivable
D.Both a and b
E.Both a and c
Annual reports are in a sense, evaluations of management’s performance but since they
are prepared by management they are likely to:
A.exclude the details of management discussion and analysis.
B.portray the firm’s past performance in a most favorable light.
C.give the shareholders the opportunity to objectively evaluate management’s
day-to-day performance during the past year.
D.exclude the details of the minority interests groups.
Based on a five year MACRS depreciation schedule, depreciation will occur over a
____ period.
A.6 year period
B.5 year period
C.4.5 year period
D.7 year period
What are the payments on a $12,500, four-year bank loan at 12% compounded
monthly?
A.$204.17
B.$329.17
C.$4115.50
D.$461.2
If a firm had the following mix of capital components:
its capital structure would be described as:
A.25% debt and 75% equity
B.25% debt, 20% preferred stock, and 55% equity
C.45% debt and 55% equity
D.both a and b