It takes The Crossroads Boutique an average of 61 days to sell its inventory and 30 days
to collect its accounts receivable. The firm has sales of $568,700 and costs of goods
sold of $398,800. What is the accounts receivable turnover rate?
A. 5.98
B. 11.41
C. 12.17
D. 12.23
E. 12.55
Answer:
Which one of the following statements related to the inventory period is correct?
A. The inventory period increases as the inventory turnover rate increases.
B. The length of the inventory period depends on the length of the cash cycle.
C. The inventory period is the average number of days a firm holds inventory on its
shelves.
D. The inventory period is equal to the operating cycle minus the accounts payable
period.
E. The inventory period has no effect on the cash cycle.
Answer:
A bond has an average return of 6.3 percent and a standard deviation of 3.8 percent.
What range of returns would you expect to see 68 percent of the time on this security?
A. -1.30 percent to 13.9 percent
B. -1.30 percent to 10.1 percent
C. 2.5 percent to 7.8 percent
D. 2.5 percent to 10.1 percent
E. 2.5 percent t0 13.9 percent
Answer:
During the past year, ABC stock has sold for as little as $19 a share and a much as $33
a share. Which one of the following terms applies to these prices?
A. Benchmark values
B. Price splits
C. Price dividers
D. Split range
E. Trading range
Answer:
You own two bonds. Both bonds pay annual interest, have 6 percent annual coupons,
$1,000 face values, and currently have 6 percent yields to maturity. Bond A has 12
years to maturity and Bond B has 4 years to maturity. If the market rate of interest rises
unexpectedly to 7 percent, Bond _____ will be the most volatile with a price decrease
of _____ percent.
A. A; 5.73
B. A; 6.08
C. A; 7.94
D. B; 3.39
E. B; 4.51
Answer:
Common-size financial statements present all balance sheet account values as a
percentage of:
A. the forecasted budget.
B. sales.
C. total equity.
D. total assets.
E. last year’s account value.
Answer:
Cromwell Enterprises is acquiring Athens, Inc. for $899,000. Athens has agreed to
accept annual payments of $210,000 at an interest rate of 8.5 percent. How many years
will it take Cromwell Enterprises to pay for this purchase?
A. 5.00 years
B. 5.18 years
C. 5.55 years
D. 5.47 years
E. 5.80 years
Answer:
Today, Sweet Snacks is investing $491,000 in a new oven. As a result, the company
expects its cash flows to increase by $64,000 a year for the next two years and by
$98,000 a year for the following three years. How long must the firm wait until it
recovers all of its initial investment?
A. 3.97 years
B. 4.18 years
C. 4.46 years
D. 4.70 years
E. The project never pays back.
Answer:
Rick is planning to invest the following amounts at 6 percent interest. How much
money will he have saved at the end of year 3?
A. $2,200.00
B. $2,238.47
C. $2,309.80
D. $2,309.16
E. $2,402.19
Answer:
The period 1926-2011 illustrates that U.S. Treasury bills:
A. outperform inflation by approximately 1 percent every year.
B. have a zero standard deviation.
C. can either outperform or underperform inflation on an annual basis.
D. produce a rate of return roughly equivalent to the rate of return on long-term
government bonds.
E. routinely have negative annual returns.
Answer:
Which one of the following statements is correct?
A. The risk premium on a risk-free security is generally considered to be 1 percent.
B. The expected rate of return on any security, given multiple states of the economy,
must be positive.
C. There is an inverse relationship between the level of risk and the risk premium given
a risky security.
D. If a risky security is correctly priced, its expected risk premium will be positive.
E. If a risky security is priced correctly, it will have an expected return equal to the
risk-free rate.
Answer:
What is the future value of $4,900 invested for 8 years at 7 percent compounded
annually?
A. $8,397.74
B. $8,419.11
C. $8,511.15
D. $8,513.06
E. $8,520.22
Answer:
Which one of the following will increase the cost of equity, all else held constant?
A. Increase in the dividend growth rate
B. Decrease in beta
C. Decrease in future dividends
D. Increase in stock price
E. Decrease in market risk premium
Answer:
Doris’ Boutique has 4,000 shares of stock outstanding at a price per share of $15. What
will the price per share be if the firm pays a $1.30 per share dividend? Ignore taxes and
market imperfections.
A. $13.70
B. $15.40
C. $15.80
D. $16.00
E. $18.20
Answer:
Which one of the following actions will decrease the operating cycle?
A. Increasing inventory
B. Paying suppliers faster
C. Buying more inventory with cash rather than with credit
D. Granting customers more time to pay for their credit purchases
E. Lessening the production time needed to manufacture a good for sale
Answer:
You want to have $25,000 for a down payment on a house 6 years from now. If you can
earn 6.5 percent, compounded annually, on your savings, how much do you need to
deposit today to reach your goal?
A. $17,133.35
B. $17,420.73
C. $17,880.69
D. $18,211.17
E. $18,886.40
Answer: