Which one of the following types of bonds permits its issuer to forego paying interest
payments if certain natural events cause significant losses?
A. PETS
B. PUT
C. CAT
D. PINES
E. LIBOR
Which one of the following has the narrowest distribution of returns for the period
1926-2011?
A. Long-term corporate bonds
B. Long-term government bonds
C. Intermediate-terms government bonds
D. Large-company stocks
E. Small-company stocks
The balance sheet of a firm shows current liabilities of $56,300 and long-term debt of
$289,200 as of last year. Current liabilities are $76,900 and long-term debt is $248,750
as of today, which is the end of the current year. The financial statements for the current
year reflect an interest paid amount of $29,700 and dividends of $19,000. What is the
amount of the net new borrowing?
A. -$40,450
B. $40,450
C. $64,750
D. $70,150
E. $78,250
A credit card has a stated interest rate of 14.56 percent. What is the APR if interest is
compounded monthly?
A. 13.09 percent
B. 13.46 percent
C. 13.90 percent
D. 14.56 percent
E. 14.82 percent
Which one of the following can occur if the operating cycle decreases while both the
accounts receivable and the accounts payable periods remain constant?
A. Inventory period remains constant
B. Cash cycle increases
C. Inventory turnover rate increases
D. Accounts receivable turnover rate increases
E. Cash cycle remains constant
Alpha Industries is considering a project with an initial cost of $7.4 million. The project
will produce cash inflows of $1.54 million a year for seven years. The firm uses the
subjective approach to assign discount rates to projects. For this project, the subjective
adjustment is +1.5 percent. The firm has a pretax cost of debt of 8.6 percent and a cost
of equity of 13.7 percent. The debt-equity ratio is 0.0.65 and the tax rate is 35 percent.
What is the net present value of the project?
A. -$372,951
B. -$187,016
C. $48,209
D. $133,333
E. $269,480
Which one of the following transactions will increase the liquidity of a firm?
A. Cash purchase of new production equipment
B. Payment of an account payable
C. Cash purchase of inventory
D. Credit sale of inventory at cost
E. Cash payment of employee wages
Which one of the following is the graphical representation of the sum of the carrying
costs and the opportunity costs of a credit policy?
A. Accounts receivable aging
B. Economic credit function
C. Optimal credit curve
D. Credit analysis
E. Credit cost curve
Wage Garnishers, Inc. has sales for the year of $50,300 and cost of goods sold of
$23,700. The firm carries an average inventory of $4,800 and has an average accounts
payable balance of $4,400. What is the inventory period?
A. 12.39 days
B. 18.68 days
C. 31.29 days
D. 73.92 days
E. 81.36 days
A bond has an 8 percent coupon rate, a face value of $1,000, semiannual payments, and
sells at par. The current yield is _____ percent and the effective annual yield is _____
percent.
A. 6.76; 6.87
B. 6.76; 6.96
C. 7.00; 7.00
D. 8.00; 8.16
E. 7.23; 7.23