Over the last four years, the common stock of Plymouth Shippers has had an arithmetic
average return of 9.3 percent. Three of those four years produced returns of 14.1
percent, 15.6 percent, and 3.4 percent, respectively. What is the geometric average
return for this four-year period?
A. 7.72 percent
B. 8.41 percent
C. 8.93 percent
D. 9.16 percent
E. 9.368 percent
Which one of the following 5 Cs refers to the general economic climate in a customers
line of business?
A. Capital
B. Conditions
C. Capacity
D. Character
E. Collateral
Delfinos expects to pay an annual dividend of $1.50 per share next year. What is the
anticipated dividend for year 5 if the firm increases its dividend by 2 percent annually?
A. $1.50 x (1.02)1
B. $1.50 x (1.02)2
C. $1.50 x (1.02)3
D. $1.50 x (1.02)4
E. $1.50 x (1.02)5
Isabella is considering three mutually exclusive options for the additional space she just
added to her specialty womens store. The cost of the expansion was $127,000. She can
use this additional space to add a fabric and quilting section, add an exclusive gifts
department, or expand into imported decorator items for the home. She estimates the
present value of these options at $114,000 for fabric and quilting, $163,000 for
exclusive gifts, and $138,000 for decorator items. Which option(s), if any, should
Isabella accept?
A. None of these options
B. Fabric and quilting only
C. Exclusive gifts only
D. Exclusive gifts and decorator items only
E. All three options
Janice plans to save $75 a month, starting today, for 20 years. Kate plans to save $80 a
month for 20 years, starting one month from today. Both Janice and Kate expect to earn
an average return of 5.5 percent on their savings. At the end of the 20 years, Kate will
have approximately _____ more than Janice.
A. $2,028.39
B. $2,066.67
C. $2,091.50
D. $2,178.14
E. $2,189.12
Cash flow to stockholders is defined as:
A. cash flow from assets plus cash flow to creditors.
B. operating cash flow minus cash flow to creditors.
C. dividends paid plus the change in retained earnings.
D. dividends paid minus net new equity raised.
E. net income minus the addition to retained earnings.
Anna pays 1.5 percent interest monthly on her credit card account. When the interest
rate on that debt is expressed as if it were compounded only annually, the rate would be
referred to as the:
A. annual percentage rate.
B. compounded rate.
C. quoted rate.
D. stated rate.
Your firm has cash of $3,800, accounts receivable of $8,600, inventory of $33,100, and
net working capital of $1,100. What is the cash ratio?
A. 0.08
B. 0.09
C. 0.90
D. 1.21
E. 3.45
Marine Expeditors has three divisions. Division A is the core of the business and
represents 80 percent of the firms operations. Division B is involved only with
contractual short-term projects and therefore has about 8 percent less risk than Division
A. Division C develops and markets new products and is about 12 percent riskier than
Division A and about equal in size to Division B. The manager of Division A has
suggested that the operations of his division be increased by 10 percent next year. The
proposed project should probably be assigned a required return that is equal to _____
percent of the firms weighted average cost of capital.
A. 40
B. 60
C. 80
D. 100
E. 110
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