Your favorite running shoes cost $91 in the U.S. while the identical shoes cost
Can$114.50 in Canada. According to purchasing power parity, what is the Can$/$
exchange rate?
A. Can$0.7948/$1
B. Can$0.8426/$1
C. Can$0.9108/$1
D. Can$1.2582/$1
E. Can$1.3305/$1
You have agreed to pay a 5 percent commission to your best friend if he can locate a
buyer for your car. This arrangement is most similar to the compensation arrangement
for which one of these individuals who is involved with the stock market?
A. DMM
B. Floor trader
C. Market maker
D. Commission broker
E. Dealer
Given the following information, what is the standard deviation of the returns on this
stock?
A. 7.38 percent
B. 7.55 percent
C. 7.80 percent
D. 7.91 percent
E. 8.06 percent
Precision Manufacturing had the following operating results for 2014: sales = $38,900;
cost of goods sold = $24,600; depreciation expense = $1,700; interest expense =
$1,400; dividends paid = $1,000. At the beginning of the year, net fixed assets were
$14,300, current assets were $8,700, and current liabilities were $6,600. At the end of
the year, net fixed assets were $13,900, current assets were $9,200, and current
liabilities were $7,400. The tax rate for 2014 was 34 percent. What is the cash flow
from assets for 2014?
A. $8,047
B. $8,292
C. $8,658
D. $9,492
E. $9,964
Lawlers is considering a new project. The company has a debt-equity ratio of 0.72. The
companys cost of equity is 15.1 percent, and the aftertax cost of debt is 7.2 percent. The
firm feels that the project is riskier than the company as a whole and that it should use
an adjustment factor of +3 percent. What is the WACC it should use for the project?
A. 12.53 percent
B. 12.98 percent
C. 14.79 percent
D. 15.14 percent
E. 15.68 percent
What is the primary purpose of a lockup agreement?
A. Ensures the lead underwriter maintains an economic interest in the IPO it is
managing
B. Ensures the issuer of new securities receives a minimally agreed upon amount from
the issue
C. Ensures no research reports are issued during the waiting period
D. Ensures company insiders maintain an economic interest in the issuer of an IPO for a
minimum period of time
E. Ensures an IPO is not underpriced by more than 5 percent
The standard deviation measures the _____ of a securitys returns over time.
A. average value
B. frequency
C. volatility
D. mean
E. arithmetic average
All else equal, an increase in which one of the following will decrease owners equity?
A. Increase in inventory
B. Increase in accounts payable
C. Increase in accounts receivable
D. Increase in net working capital
E. Increase in net fixed assets
The Lumber Yard has the following projected sales.
The firm collects 50 percent of its sales in the month of sale, 47 percent in the month
following the month of sale, and another 2 percent in the second month following the
month of sale. The firm never collects 1 percent of its sales. What is the amount of the
July collections?
A. $169,819
B. $171,508
C. $173,215
D. $175,500
E. $176,655
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
Suppose the spot exchange rate for the Canadian dollar is Can$1.19 and the six-month
forward rate is Can$1.16. Assuming absolute PPP holds, what is the current cost in the
United States of a beer if the price in Canada is Can$3.75?
A. $2.48
B. $2.54
C. $3.15
D. $3.42
E. $3.51
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.
PayDay Loans is offering a special on one-year loans. The company will loan you
$5,000 today in exchange for one payment of $5,900 one year from now. What is the
APR on this loan?
A. 10.63 percent
B. 11.20 percent
C. 11.63 percent
D. 17.93 percent
E. 18.00 percent
Bob Gibsons has sales for the year of $311,400, cost of goods sold equal to 78 percent
of sales, and an average inventory of $42,800. The profit margin is 6 percent and the tax
rate is 35 percent. How many days on average does it take the firm to sell an inventory
item?
A. 5.68 days
B. 11.46 days
C. 64.32 days
D. 71.74 days
E. 82.03 days
Shoreline Foods pays a constant annual dividend of $1.60 a share and currently sells for
$28.50 a share. What is the rate of return?
A. 4.56 percent
B. 5.39 percent
C. 5.61 percent
D. 6.63 percent
E. 6.91 percent
PayDay Loans wants to earn an effective annual return on its consumer loans of 18
percent per year. The bank uses daily compounding on its loans. What interest rate is
the bank required by law to report to potential borrowers?
A. 16.23 percent
B. 16.56 percent
C. 17.62 percent
D. 18.39 percent
E. 18.88 percent
Suppose you know that a companys stock currently sells for $75 per share and the
required return on the stock is 14 percent. You also know that the total return on the
stock is evenly divided between capital gains yield and a dividend yield. If its the
companys policy to always maintain a constant growth rate in its dividends, what is the
current dividend per share?
A. $4.24
B. $4.91
C. $5.34
D. $5.76
E. $6.07
An auction market:
A. is an electronic means of exchanging securities.
B. has a physical trading floor.
C. handles primary market transactions exclusively.
D. is also referred to as an OTC market.
E. is dealer based.
Last year, Isaac earned 10.6 percent on her investments while U.S. Treasury bills
yielded 3.8 percent and the inflation rate was 3.1 percent. What real rate of return did
she earn on her investments last year?
A. 6.63 percent
B. 7.27 percent
C. 8.56 percent
D. 9.24 percent
E. 10.39 percent