1) Which one of the following is an ordinary annuity, but not a perpetuity?
A.$75 paid at the beginning of each monthly period for 50 years
B.$15 paid at the end of each monthly period for an infinite period of time
C.$40 paid quarterly for 5 years, starting today
D.$50 paid every year for ten years, starting today
E.$25 paid weekly for 1 year, starting one week from today
2) The Universal Network has sales of $496,500, cost of goods sold of $264,900, and
inventory of $87,100. What is the inventory turnover rate?
A.1.33
B.3.04
C.5.70
D.7.14
E.8.47
3) AB Builders, Inc. has 12-year bonds outstanding with a face value of $1,000 and a
market price of $974. The bonds pay interest annually and have a yield to maturity of
4.03 percent. What is the coupon rate?
A.3.75 percent
B.4.20 percent
C.4.25 percent
D.7.50 percent
E.8.40 percent
4) Which of the following individuals commonly use finance in the course of their job?
I. Chief financial officers
II. Accountants
III. Security analysts
IV. Strategic managers
A.I and II only
B.III and IV only
C.I and III only
D.I, II, and III only
E.I, II, III, and IV
5) The Donut Hut has sales of $68,000, current assets of $11,300, net income of $5,100,
net fixed assets of $54,900, total debt of $23,800, and dividends of $800. What is the
sustainable growth rate?
A.10.48 percent
B.11.29 percent
C.11.79 percent
D.12.08 percent
E.12.39 percent
6) Travis recently purchased a callable bond. However, that bond cannot be currently
redeemed by the issuer. Thus, the bond must currently be:
A.subject to a sinking fund provision
B.a debenture
C.a “fallen angel”
D.call protected
E.unrated
7) Which one of the following statements correctly applies to a sole proprietorship?
A.The business entity has an unlimited life
B.The ownership can easily be transferred to another individual
C.The owner enjoys limited liability for the firm’s debts
D.Debt financing is easy to arrange in the firm’s name
E.Obtaining additional equity is dependent on the owner’s personal finances
8) Suppose the Swiss franc exchange rate is SF 1.1582 = $1, and the euro exchange rate
is 0.7538 = $1. What is the cross-rate in terms of Swiss francs per euro?
A.SF 1.5074 = 1
B.SF 1.5098 = 1
C.SF 1.5132 = 1
D.SF 1.5246 = 1
E.SF 1.5365 = 1
9) The more actively traded large companies that are listed on NASDAQ are traded in
which one of the NASDAQ markets?
A.National
B.Capital
C.Regional
D.Global Select
E.Global
10) Brickhouse is expected to pay annual dividends of $1.90 and $2.10 over the next
two years, respectively. After that, the company expects to pay a constant dividend of
$2.30 a share. What is the value of this stock at a required return of 16 percent?
A.$12.44
B.$13.30
C.$13.89
D.$14.08
E.$14.60
11) Financial leverage:
A.increases as the net working capital increases
B.is equal to the market value of a firm divided by the firm’s book value
C.is inversely related to the level of debt
D.is the ratio of a firm’s revenues to its fixed expenses
E.increases the potential return to the shareholders
12) What is the net present value of the following cash flows if the relevant discount
rate is 8 percent?
A.$1,587.61
B.$2,311.92
C.$2,900.15
D.$3,248.87
E.$3,545.60
13) What is the payback period for a project with the following cash flows?
A.2.56 years
B.2.89 years
C.3.17 years
D.3.74 years
E.never
14) Which one of the following is the length of time that a retailer owes its supplier for
an inventory purchase?
A.Inventory period
B.Accounts receivable period
C.Accounts payable period
D.Operating cycle
E.Cash cycle
15) Which one of the following is the best example of an announcement that is most apt
to result in an unexpected return?
A.A news bulletin that the anticipated layoffs by a firm will occur as expected on
December 1
B.Announcement that the CFO of the firm is retiring June 1 as previously announced
C.Announcement that a firm will continue its practice of paying a $3 a share annual
dividend
D.Statement by a firm that it has just discovered a manufacturing defect and is recalling
its product
E.The verification by senior management that the firm is being acquired as had been
rumored
16) Beginning in 2011, the Dodd-Frank Wall Street Reform and Consumer Protection
Act requires corporations with a market value over ________ to allow a nonbinding
shareholder vote on executive pay.
A.$25,000,000
B.$50,000,000
C.$75,000,000
D.$100,000
E.$750,000
17) Who determines the offer price in a Dutch auction?
A.Lead underwriter
B.Chief financial officer of the issuing firm
C.SEC
D.Bidders
E.Board of directors of the issuing firm
18) Chasteen Hall currently has 55 days in its cash cycle and 131 days in its operating
cycle. The firm purchases its inventory from one supplier. This supplier has offered a 5
percent discount to The Switch Back if it will pay for its purchases within 10 days
instead of the normal 32 days. If the Switch Back opts to take advantage of the discount
offered, its new operating cycle will be _____ days and its new cash cycle will be
_____ days.
A.109; 32
B.109; 77
C.131; 32
D.131; 77
E.153; 77
19) Gee Whiz Underwriters retains the difference between its buying price and its
offering price on new securities. What is this amount called?
A.Markup
B.Commission
C.Rights price
D.Spread
E.Offer
20) Which one of the following is a system for managing demand-dependent
inventories that minimizes the amount of inventory on hand?
A.Inventory flow log
B.Materials requirements planning
C.Just-in-time inventory system
D.Kanban
E.Keiretsu
21) You want to buy a new sports coupe for $84,600, and the finance office at the
dealership has quoted you a 7.1 percent APR loan for 48 months to buy the car. What
will your monthly payments be? What is the effective annual rate on this loan?
A.$2,017.84; 7.24 percent
B.$2,017.84; 7.29 percent
C.$2,017.84; 7.34 percent
D.$2,029.78; 7.29 percent
E.$2,029.78; 7.34 percent
22) Paying interest reduces the taxes owed by a firm. Which one of the following terms
applies to this relationship?
A.Static theory of interest rates
B.M&M Proposition I
C.Financial risk
D.Interest tax shield
E.Homemade leverage
23) Which one of the following functions should be assigned to the treasurer rather than
the controller?
A.Data processing
B.Cost accounting
C.Tax management
D.Cash management
E.Financial accounting
24) Which of the following should be included when compiling pro forma statements
for a proposed investment?
I. Forecasted sales
II. Start-up costs
III. Aftertax salvage value of any assets sold
IV. Anticipated changes in net working capital
A.I only
B.II and IV only
C.I, II, and III only
D.II, III, and IV only
E.I, II, III, and IV
25) Which one of the following statements is correct?
A.A longer payback period is preferred over a shorter payback period
B.The payback rule states that you should accept a project if the payback period is less
than one year
C.The payback period ignores the time value of money
D.The payback rule is biased in favor of long-term projects
E.The payback period considers the timing and amount of all of a project’s cash flows
26) Which of the following ratings indicate that a bond is low quality?
I. Baa
II. BB
III. B
IV. Ba
A.II only
B.II and III only
C.II, III, and IV only
D.I, II, and III only
E.I, II, III, and IV
27) When comparing savings accounts, you should select the account that has the:
A.lowest annual percentage rate
B.highest annual percent rate
C.highest stated rate
D.lowest effective annual rate
E.highest effective annual rate
28) Today, you deposit $2,400 in a bank account that pays 4 percent simple interest.
How much interest will you earn over the next 5 years?
A.$96.00
B.$101.15
C.$480.00
D.$492.16
E.$519.97
29) Your portfolio has provided you with returns of 8.6 percent, 14.2 percent, -3.7
percent, and 12.0 percent over the past four years, respectively. What is the geometric
average return for this period?
A.7.25 percent
B.7.54 percent
C.7.57 percent
D.7.63 percent
E.9.55 percent
30) A nine-year project is expected to generate annual revenues of $114,500, variable
costs of $73,600, and fixed costs of $14,000. The annual depreciation is $3,500 and the
tax rate is 34 percent. What is the annual operating cash flow?
A.$14,301
B.$14,788
C.$15,052
D.$17,506
E.$18,944
31) The lower the standard deviation of returns on a security, the _____ the expected
rate of return and the _____ the risk.
A.lower; lower
B.lower; higher
C.higher; lower
D.higher; higher
E.You cannot determine anything about the expected rate of return from the standard
deviation
32) The Outlet Mall has a cost of equity of 16.8 percent, a pretax cost of debt of 8.1
percent, and a return on assets of 14.5 percent. Ignore taxes. What is the debt-equity
ratio?
A.0.18
B.0.39
C.0.44
D.0.52
E.0.57
33) A portfolio is comprised of 35 securities with varying betas. The lowest beta for an
individual security is 0.74 and the highest of the security betas of 1.51 . Given this
information, you know that the portfolio beta:
A.must be 1.0 because of the large number of securities in the portfolio
B.is the geometric average of the individual security betas
C.must be less than the market beta
D.will be between 0 and 1.0
E.will be greater than or equal to 0.74 but less than or equal to 1.51