The price at which a dealer will purchase a bond is called the _____ price.
A. asked
B. face
C. call
D. put
E. bid
Answer:
The net present value of a project’s cash inflows is $8,216 at a 14 percent discount rate.
The profitability index is 1.03 and the firm’s tax rate is 34 percent. What is the initial
cost of the project?
A. $6,900.00
B. $7,018.50
C. $7,428.32
D. $7,976.70
E. $8,066.67
Answer:
Suppose a stock had an initial price of $74 per share, paid a dividend of $0.80 per share
during the year, and had an ending share price of $77. What was the capital gains yield?
A. 2.70 percent
B. 3.29 percent
C. 3.78 percent
D. 4.05 percent
E. 4.94 percent
Answer:
Which one of the following events must occur before a firm can offer a liquidating
dividend?
A. Bankruptcy filing
B. Insolvency declaration
C. Asset sale
D. Negative equity
E. Failed bond issue
Answer:
Lester lent money to The Corner Store by purchasing bonds issued by the store. The
rate of return that he and the other lenders require is referred to as the:
A. pure play cost.
B. cost of debt.
C. weighted average cost of capital.
D. subjective cost.
E. cost of equity.
Answer:
The capital gains yield equals which one of the following?
A. Total yield
B. Current discount rate
C. Market rate of return
D. Dividend yield
E. Dividend growth rate
Answer:
Sara is investing $1,000 today. Which one of the following will increase the future
value of that amount?
A. Shortening the investment time period.
B. Paying interest only on the principal amount.
C. Paying simple interest rather than compound interest.
D. Paying interest only at the end of the investment period rather than throughout the
investment period.
E. Increasing the interest rate.
Answer:
Which one of the following is most apt to delay the collection of cash?
A. Having customers mail checks to a local lockbox rather than the home office
B. Depositing checks throughout the day
C. Posting payments to accounts receivable prior to making deposits
D. Collecting mail twice daily
E. Supplying customers with bar coded payment slips
Answer:
Shareholders’ equity is equal to:
A. total assets plus total liabilities.
B. net fixed assets minus total liabilities.
C. net fixed assets minus long-term debt plus net working capital.
D. net working capital plus total assets.
E. total assets minus net working capital.
Answer:
Mind Blowers, Inc. has a new project in mind that will increase accounts receivable by
$28,000, decrease accounts payable by $6,000, increase fixed assets by $36,000, and
decrease inventory by $11,000. What is the amount the firm should use as the initial
cash flow attributable to net working capital when it analyzes this project?
A. -$45,000
B. -$37,000
C. -$23,000
D. -$17,000
E. -$1,000
Answer:
Which one of the following is the equity risk arising from the daily operations of a
firm?
A. Strategic risk
B. Financial risk
C. Liquidity risk
D. Industry risk
E. Business risk
Answer:
Suppose that a small, rural city in the countryside of North Dakota plans to issue
$150,000 worth of 10-year bonds. Which one of the following components of the
bond’s yield will be affected by the fact that no active secondary market is expected for
these bonds?
A. Real rate
B. Liquidity premium
C. Interest rate risk premium
D. Inflation premium
E. Taxability premium
Answer:
Any changes to a firm’s projected future cash flows that are caused by adding a new
project are referred to as which one of the following?
A. Eroded cash flows
B. Deviated projections
C. Incremental cash flows
D. Directly impacted flows
E. Assumed flows
Answer:
River City Gifts has an average collection period of 20 days and annual sales of
$650,000. What is the average investment in accounts receivable as shown on the
balance sheet?
A. $18,850
B. $20,375
C. $25,506
D. $28,900
E. $35,616
Answer:
You just received a loan offer from Friendly Loans. The company is offering you
$5,000 at 14.3 percent interest. The monthly payment is only $100. If you accept this
offer, how long will it take you to pay off the loan?
A. 5.84 years
B. 6.37 years
C. 6.80 years
D. 7.33 years
E. 7.59 years
Answer:
Bill just financed a used car through his credit union. His loan requires payments of
$275 a month for five years. Assuming that all payments are paid on time, his last
payment will pay off the loan in full. What type of loan does Bill have?
A. Amortized
B. Complex
C. Pure discount
D. Lump sum
E. Interest-only
Answer:
The Treasury yield curve plots the yields on Treasury notes and bonds relative to the
____ of those securities.
A. face value
B. market price
C. maturity
D. coupon rate
E. issue date
Answer:
On which one of the following dates is the determination made as to which
shareholders will receive a dividend payment?
A. Date of record
B. Ex-dividend date
C. Payment date
D. Declaration date
E. Public announcement date
Answer:
If your nominal rate of return is 14.38 percent and your real rate of return is 4.97
percent, what is the inflation rate?
A. 8.47 percent
B. 8.96 percent
C. 9.44 percent
D. 19.35 percent
E. 19.92 percent
Answer:
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.
Answer:
An increase in which one of the following will increase net income?
A. Fixed costs
B. Depreciation
C. Marginal tax rate
D. Revenue
E. Dividends
Answer:
You are analyzing a company that has cash of $11,200, accounts receivable of $27,800,
fixed assets of $124,600, accounts payable of $31,300, and inventory of $56,900. What
is the quick ratio?
A. 0.30
B. 0.67
C. 0.80
D. 1.25
E. 1.37
Answer:
Cinram Machines has the following estimates for its new gear assembly project: price =
$1,340 per unit; variable costs = $348 per unit; fixed costs = $5.1 million; quantity =
82,000 units. Suppose the company believes all of its estimates are accurate only to
within 5 percent. What value should the company use for its total variable costs when
performing its best-case scenario analysis?
A. $26,578,064
B. $28,464,660
C. $28,536,000
D. $28,802,130
E. $30,864,538
Answer:
Dan is a chemist for ABC, a major drug manufacturer. Dan cannot earn excess profits
on ABC stock based on the knowledge he has related to his experiments if the financial
markets are:
A. weak form efficient.
B. strong form efficient.
C. semistrong form efficient.
D. efficient at any level.
E. aware that the trader is an insider.
Answer: