Your parents spent $6,200 to buy 500 shares of stock in a new company 13 years ago.
The stock has appreciated 9 percent per year on average. What is the current value of
those 500 shares?
A. $18,824.17
B. $19,007.99
C. $19,580.92
D. $20,515.08
E. $22,449.92
Answer:
Musical Charts just paid an annual dividend of $2.45 per share. This dividend is
expected to increase by 3.3 percent annually. Currently, the firm has a beta of 1.09 and a
stock price of $36 a share. The risk-free rate is 4.2 percent and the market rate of return
is 12.6 percent. What is the cost of equity capital for this firm?
A. 10.28 percent
B. 11.84 percent
C. 12.29 percent
D. 12.95 percent
E. 13.42 percent
Answer:
Which one of the following features applies to NASDAQ but not the NYSE?
A. Trading in the crowd
B. Multiple market maker system
C. SuperDot
D. Broker market
E. Physical trading floor
Answer:
Five years ago, you purchased 600 shares of stock. The annual returns have been 7.2
percent, -19.4 percent, 3.8 percent, 14.2 percent, and 27.9 percent, respectively. What is
the variance of these returns?
A. 0.029889
B. 0.030021
C. 0.030068
D. 0.030133
E. 0.030284
Answer:
The concept of marginal taxation is best exemplified by which one of the following?
A. Kirby’s paid $120,000 in taxes while its primary competitor paid only $80,000 in
taxes.
B. Johnson’s Retreat paid only $45,000 on total revenue of $570,000 last year.
C. Mitchell’s Grocer increased its sales by $52,000 last year and had to pay an
additional $16,000 in taxes.
D. Burlington Centre paid no taxes last year due to carryforward losses.
E. The Blue Moon paid $2.20 in taxes for every $10 of revenue last year.
Answer:
Which one of the following is defined as an agreement to exchange two securities or
two currencies?
A. Hedge
B. Swap
C. SWIFT
D. Gilt
E. Arbitrage
Answer:
Net working capital is defined as:
A. the depreciated book value of a firm’s fixed assets.
B. the value of a firm’s current assets.
C. available cash minus current liabilities.
D. total assets minus total liabilities.
E. current assets minus current liabilities.
Answer:
Phil’s Dinor purchased some new equipment two years ago for $89,500. Today, it is
selling this equipment for $67,000. What is the aftertax cash flow from this sale if the
tax rate is 35 percent? The MACRS allowance percentages are as follows, commencing
with year 1: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent.
A. $58,586
B. $63,421
C. $67,000
D. $70,938
E. $74,875
Answer:
Lexington Stables just declared a 15 percent stock dividend. Which one of the
following increased by 15 percent as a result of this dividend?
A. Book value of firm’s equity
B. Shareholders’ wealth
C. Number of shares outstanding
D. Firm’s cash balance
E. Stock price
Answer:
A firm has $42,900 in receivables and $211,800 in total assets. The total asset turnover
rate is 1.40 and the profit margin is 5.2 percent. How long on average does it take the
firm to collect its receivables?
A. 6.91 days
B. 9.45 days
C. 11.68 days
D. 31.25 days
E. 52.81 days
Answer:
Which one of the following statements is correct?
A. Oral offers can be made for new securities during the waiting period.
B. A Green Shoe letter must be provided to all investors who purchase shares of a new
equity offering.
C. Corporate directors have the authority to authorize additional shares of stock for a
new issue.
D. The underwriters must approve any increase in the authorized number of shares for a
firm.
E. When issuing new securities, the first step is the distribution of the prospectus.
Answer:
The Townhouse Galleries offers credit to its customers at a rate of 1.6 percent per
month. What is the effective annual rate of this credit offer?
A. 18.45 percent
B. 19.09 percent
C. 19.41 percent
D. 20.04 percent
E. 20.98 percent
Answer:
Which one of the following is the rate that most international banks charge when they
loan Eurodollars to other banks?
A. ADR
B. LIBOR
C. Cross-rate
D. Gilt rate
E. Swap rate
Answer:
Investors receive a total return of 13.7 percent on the common stock of Dexter
International. The stock is selling for $41.68 a share. What is the dividend growth rate if
the company plans to pay an annual dividend of $2.10 a share next year?
A. 7.42 percent
B. 8.66 percent
C. 10.75 percent
D. 11.60 percent
E. 13.70 percent
Answer:
Which one of the following refers to a customer’s willingness to meet his or her credit
obligations?
A. Capital
B. Conditions
C. Capacity
D. Character
E. Collateral
Answer:
The cost of capital for a project depends primarily on which one of the following?
A. Source of funds used for the project
B. Division within the firm that undertakes the project
C. Project’s modified internal rate of return
D. How the project uses its funds
E. Project’s fixed costs
Answer: