1) A credit card has an annual percentage rate of 12.9 percent and charges interest
monthly. The effective annual rate on this account:
A.will be less than 12.9 percent
B.can either be less than or equal to 12.9 percent
C.is 12.9 percent
D.can either be greater than or equal to 12.9 percent
E.will be greater than 12.9 percent
2) Aztec Movers pays a constant annual dividend of $1.55 per share on its stock. Last
year at this time, the market rate of return on this stock was 14.8 percent. Today, the
market rate has fallen to 11.2 percent. What would your capital gains yield have been if
you had purchased this stock one year ago and then sold the stock today?
A.18.78 percent
B.22.03 percent
C.28.16 percent
D.30.00 percent
E.32.14 percent
3) Brewster’s writes 145 checks a day for an average amount of $211 each. These
checks generally clear the bank 3.5 days after they are written. In addition, the firm
generally receives an average of $48,700 a day in checks. The checks that are received
are deposited immediately and the funds are generally available the following day.
What is the amount of the firm’s disbursement float?
A.$104,625.00
B.$107,082.50
C.$155,255.50
D.$170,450.00
E.$48,700.00
4) Which one of the following will generally receive the highest priority in a
bankruptcy liquidation, assuming the absolute priority rule is followed?
A.Claims by unsecured creditors
B.Employee wages
C.Government tax claims
D.Contributions to employee retirement plans
E.Bankruptcy administrative expenses
5) A perpetuity in Canada is frequently referred to as which one of the following?
A.Consul
B.Infinity
C.Forever cash
D.Dowry
E.Forevermore
6) The stream of customer instructions to buy and sell securities is called the:
A.order flow
B.market maker
C.execution stream
D.operations flow
E.buyer’s stream
7) The Doll House has a pre-tax cost of debt of 7.9 percent and a return on assets of
11.7 percent. The debt-equity ratio 0.45. Ignore taxes. What is the cost of equity?
A.11.87 percent
B.12.03 percent
C.12.47 percent
D.12.98 percent
E.13.41 percent
8) What is the NPV of the following set of cash flows at a discount rate of zero percent?
What if the discount rate is 15 percent?
A.-$41,700; -$8,665.07
B.-$41,700; $1,208.19
C.$0; $1,208.19
D.$2,500; $1,208.19
E.$2,500; -$8,665.07
9) If a security plots to the right and below the security market line, then the security
has ____ systematic risk than the market and is _____.
A.more; overpriced
B.more; underpriced
C.less; overpriced
D.less; underpriced
E.less; correctly priced
10) Hilltop Garage pays a constant annual dividend. One year ago, when you purchased
shares of that stock at $12 a share, the dividend yield was 2 percent. Over this past year,
the inflation rate has been 2.6 percent. Today, the required return on this stock is 8
percent and you just sold all of your shares. What is your total nominal return on this
investment?
A.-77 percent
B.-75 percent
C.-73 percent
D.-70 percent
E.-66 percent
11) Capital budgeting includes the evaluation of which of the following?
A.Size of future cash flows only
B.Size and timing of future cash flows only
C.Timing and risk of future cash flows only
D.Risk and size of future cash flows only
E.Size, timing, and risk of future cash flows
12) Given the following information, what is the variance of the returns on this stock?
A.0.021387
B.0.021449
C.0.021506
D.0.021538
E.0.0215641
13) Appalachian Bank offers you a $135,000, 9-year term loan at 7.5 percent annual
interest. What will your annual loan payment be?
A.$18,507.16
B.$19,229.08
C.$20,660.02
D.$20,889.20
E.$21,163.57
14) Faith wrote a check for $22 on Friday, May 6. The check cleared the bank on
Wednesday, May 11. There were no other checks or deposits outstanding during the
month. Given this, which one of the following statements is correct?
A.On May 6, the available balance decreased by $22
B.On May 11, the available balance was $22 less than the ledger balance
C.On May 12, the ledger balance was $22 less than the available balance
D.On May 14, the available balance increased by $22
E.On May 10, the ledger balance was $22 less than the available balance
15) Gray’s Tools just issued a dividend of $1.60 per share on its common stock. The
company is expected to maintain a constant 4 percent growth rate in its dividends
indefinitely. If the stock sells for $31 a share, what is the company’s cost of equity?
A.8.81 percent
B.9.37 percent
C.9.94 percent
D.10.32 percent
E.11.46 percent
16) ASP, Inc. needs to raise $43 million to finance its expansion into new markets. The
company will sell new shares of equity via a general cash offering to raise the needed
funds. The SEC filing fee and associated administrative expenses of the offering are
$389,000. If the offer price is $38 per share and the company’s underwriters charge a
spread of 8 percent, how many shares need to be sold?
A.1,241,104 shares
B.1,312,416 shares
C.1,406,211 shares
D.1,414,141 shares
E.1,587,923 shares
17) Katie earned a 2.7 percent real rate of return on her investments for the past year.
During that time, the risk-free rate was 4.1 percent and the inflation rate was 3.6
percent. What was her nominal rate of return?
A.5.30 percent
B.5.87 percent
C.6.40 percent
D.6.67 percent
E.6.91 percent
18) The Noodle Place has total assets of $123,800, a debt-equity ratio of 0.65, and net
income of $7,100. What is the return on equity?
A.3.48 percent
B.3.73 percent
C.8.01 percent
D.9.46 percent
E.13.61 percent
19) Which one of the following statements is correct?
A.All of the major stock exchanges are U.S. based
B.The NYSE was created by the National Association of Securities Dealers in the early
1970’s
C.The American Stock Exchange is a dealer market
D.OTC markets have a physical trading floor generally located in either New York City
or Chicago
E.The primary purpose of the NYSE is to match buyers with sellers
20) Which one of the following statements is correct?
A.NASDAQ has more listed stocks than does the NYSE
B.The NYSE is a dealer market
C.NASDAQ is an auction market
D.NASDAQ has the most stringent listing requirements of any U.S. exchange
E.The trading floor for NASDAQ is located in Chicago
21) Today, you are purchasing a 20-year, 6 percent annuity at a cost of $120,000. The
annuity will pay annual payments starting one year from today. What is the amount of
each payment?
A.$9,511.08
B.$10,462.15
C.$10,754.40
D.$11,013.20
E.$12,208.19
22) A project has the following cash flows. What is the internal rate of return?
A.9.31 percent
B.10.27 percent
C.10.58 percent
D.11.23 percent
E.12.18 percent
23) You are analyzing a project and have developed the following estimates. The
depreciation is $19,800 a year and the tax rate is 34 percent. What is the best case
operating cash flow?
A.$60,456
B.$62,333
C.$64,011
D.$65,650
E.$66,240
24) When comparing savings accounts, you should select the account that has the:
A.lowest annual percentage rate
B.highest annual percent rate
C.highest stated rate
D.lowest effective annual rate
E.highest effective annual rate
25) Which one of the following is included in net working capital?
A.Land
B.Accounts payable
C.Equipment
D.Depreciation
E.Dividend
26) What is the principal amount of a bond that is repaid at the end of the loan term
called?
A.Coupon
B.Market price
C.Accrued price
D.Dirty price
E.Face value
27) Which one of the following best indicates a firm is utilizing its assets more
efficiently than it has in the past?
A.Decrease in the total asset turnover
B.Decrease in the capital intensity ratio
C.Increase in days’ sales in receivables
D.Decrease in the profit margin
E.Decrease in the inventory turnover rate
28) Gloria’s Boutique has 4,000 shares of stock outstanding at a price per share of $19.
The firm has decided to repurchase 500 of those shares in the open market. What will
the price per share be after the share repurchase is completed? Ignore taxes and market
imperfections.
A.$17.80
B.$18.40
C.$18.80
D.$19.00
E.$20.20
29) Which one of the following will increase the profit margin of a firm, all else
constant?
A.Increase in interest paid
B.Increase in fixed costs
C.Increase in depreciation expense
D.Decrease in the tax rate
E.Decrease in sales
30) 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
31)
Please refer to Oscar’s financial statements. Assume a constant net profit margin and
dividend payout ratio, and further assume all of Oscar’s assets and current liabilities
vary directly with sales. Assume long-term debt and common stock remain unchanged.
Sales are projected to increase by 10 percent. What is the external financing need for
next year?
A.-$410
B.-$260
C.$235
D.$1,320
E.$7,240