A major difference between the net present value and internal rate of return is the
interest factor.
Many bonds have a call feature, which permits the firm to retire the bonds prior to
maturity.
An investor who expects the stock market to rise should enter a stock index futures
contract to sell (make delivery).
Stock prices tend to adjust rapidly to new information.
If an option has no intrinsic value, it is “out of the money.”
The inventory turnover for an industry is 6 (every two months) but Slow Corp. turns
over its inventory 4 times a years (every three months). If annual sales are $1,000,000
and the interest cost to carry inventory is 12 percent, what is the potential savings in
interest expense if the firm achieves the industry for the turnover of its inventory?
If two investments are not mutually exclusive, the firm can make only one of them.
What is a nation’s cash inflow (outflow) on its current account and its capital account
given the following information? Was there a net currency inflow or outflow?
Since bonds pay a fixed amount of interest, their prices do not fluctuate.
If an investment requires the firm to carry more current assets, that increases the
investment’s net present value.
One measure of the safety of a preferred stock’s dividend is the earnings-per-preferred
share.
If a stock is quoted 10-11, an investor can sell the stock for $11 a share.
Commercial banks may buy and sell reserves in the federal funds market.
When a stock goes ex-dividend, its price tends to decline by the amount of the cash
dividend.
Holding period returns for greater than a year do not give an accurate measure of the
true rate of return.
A user of corn enters a contract to make future delivery of corn to reduce the risk of loss
from price fluctuations.
Prepare a monthly cash budget for a firm given the following information.
70% of the sales are for credit and are collected one month after the sale. Other receive
The purpose of aging accounts receivable is to identify rapid paying accounts.