Chapter 29: Basic Financial Tools: A review
RATIONALE:
Statement d is true, because the stock price is expected to grow at the dividend growth rate.
DIFFICULTY:
Difficulty: Moderate
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.29.04 – LO: 29-4
United States – TN – DISC: Stocks and bonds
LOCAL STANDARDS:
United States – OH – Default City – TBA
Constant growth stock
KEYWORDS:
Bloom’s: Knowledge
c.
The company’s expected capital gains yield is 5%.
d.
The company’s expected stock price at the beginning of next year is $9.50.
e.
The company’s current stock price is $20.
ANSWER:
d
POINTS:
1
Difficulty: Moderate
QUESTION TYPE:
Multiple Choice
LEARNING OBJECTIVES:
IFMG.DAVE.19.29.04 – LO: 29-4
STATE STANDARDS:
United States – TN – DISC: Stocks and bonds
United States – OH – Default City – TBA
TOPICS:
Declining constant growth
KEYWORDS:
Bloom’s: Knowledge
TYPE: Multiple Choice: Conceptual
DATE CREATED:
10/30/2017 8:23 PM
1/10/2018 11:43 AM
113. If a stock’s dividend is expected to grow at a constant rate of 5% a year, which of the following statements is
CORRECT? The stock is in equilibrium.
a.
The stock’s dividend yield is 5%.
b.
The price of the stock is expected to decline in the future.
c.
The stock’s required return must be equal to or less than 5%.
d.
The stock’s price one year from now is expected to be 5% above the current price.
e.
The expected return on the stock is 5% a year.
ANSWER:
d
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Page 62
114. Stocks A and B have the following data. Assuming the stock market is efficient and the stocks are in equilibrium,
which of the following statements is CORRECT?
A
B
10%
12%
$25
$40
7%
9%
a.
These two stocks must have the same dividend yield.
b.
These two stocks should have the same expected return.
c.
These two stocks must have the same expected capital gains yield.
d.
These two stocks must have the same expected year-end dividend.
e.
These two stocks should have the same price.
ANSWER:
a
POINTS:
Difficulty: Moderate
QUESTION TYPE:
Multiple Choice
IFMG.DAVE.19.29.04 – LO: 29-4
STATE STANDARDS:
United States – TN – DISC: Stocks and bonds
United States – OH – Default City – TBA
TOPICS:
Expected and required returns
Bloom’s: Comprehension
TYPE: Multiple Choice: Conceptual
10/30/2017 8:23 PM
1/10/2018 11:43 AM
115. Stocks A and B have the following data. Assuming the stock market is efficient and the stocks are in equilibrium,
which of the following statements is CORRECT?
A
B
TYPE: Multiple Choice: Conceptual
DATE CREATED:
10/30/2017 8:23 PM
1/10/2018 11:43 AM
Chapter 29: Basic Financial Tools: A review
Copyright Cengage Learning. Powered by Cognero.
Page 63
$25
$40
7%
9%
10%
12%
a.
The two stocks could not be in equilibrium with the numbers given in the question.
b.
A’s expected dividend is $0.50.
c.
B’s expected dividend is $0.75.
d.
A’s expected dividend is $0.75 and B’s expected dividend is $1.20.
e.
The two stocks should have the same expected dividend.
ANSWER:
d
POINTS:
1
Difficulty: Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
IFMG.DAVE.19.29.04 – LO: 29-4
and Management Science
STATE STANDARDS:
United States – TN – DISC: Stocks and bonds
LOCAL STANDARDS:
United States – OH – Default City – TBA
Expected and required returns
KEYWORDS:
Bloom’s: Comprehension
TYPE: Multiple Choice: Conceptual
DATE CREATED:
10/30/2017 8:23 PM
1/10/2018 11:43 AM
116. Stocks A and B have the following data. Assuming the stock market is efficient and the stocks are in equilibrium,
which of the following statements is CORRECT?
A
B
$25
$25
10%
5%
15%
15%
a.
Stock A has a higher dividend yield than Stock B.
b.
Currently the two stocks have the same price, but over time Stock B’s price will pass that of A.
c.
Since Stock A’s growth rate is twice that of Stock B, Stock A’s future dividends will always be twice as high
as Stock B’s.
d.
The two stocks should not sell at the same price. If their prices are equal, then a disequilibrium must exist.
e.
Stock A’s expected dividend at t = 1 is only half that of Stock B.
Chapter 29: Basic Financial Tools: A review
POINTS:
1
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
ANSWER:
e
POINTS:
1
Difficulty: Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
IFMG.DAVE.19.29.04 – LO: 29-4
STATE STANDARDS:
United States – TN – DISC: Stocks and bonds
LOCAL STANDARDS:
United States – OH – Default City – TBA
Expected and required returns
KEYWORDS:
Bloom’s: Comprehension
TYPE: Multiple Choice: Conceptual
DATE CREATED:
10/30/2017 8:23 PM
1/10/2018 11:43 AM
117. Stocks X and Y have the following data. Assuming the stock market is efficient and the stocks are in equilibrium,
which of the following statements is CORRECT?
X
Y
$30
$30
6%
4%
12%
10%
a.
Stock Y has a higher dividend yield than Stock X.
b.
One year from now, Stock X’s price is expected to be higher than Stock Y’s price.
c.
Stock X has the higher expected year-end dividend.
d.
Stock Y has a higher capital gains yield.
e.
Stock X has a higher dividend yield than Stock Y.
ANSWER:
b
Difficulty: Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
IFMG.DAVE.19.29.04 – LO: 29-4
and Management Science
STATE STANDARDS:
United States – TN – DISC: Stocks and bonds
LOCAL STANDARDS:
United States – OH – Default City – TBA
Expected and required returns
KEYWORDS:
Bloom’s: Knowledge
calculations. Please see the “Answers & Solutions” section to see calculation requirements
118. Stock X has the following data. Assuming the stock market is efficient and the stock is in equilibrium, which of the
following statements is CORRECT?
Expected dividend, D1
$3.00
Current Price, P0
$50
Expected constant growth rate
6.0%
a.
The stock’s expected dividend yield and growth rate are equal.
b.
The stock’s expected dividend yield is 5%.
c.
The stock’s expected capital gains yield is 5%.
d.
The stock’s expected price 10 years from now is $100.00.
e.
The stock’s required return is 10%.
POINTS:
1
LEARNING OBJECTIVES:
IFMG.DAVE.19.29.04 – LO: 29-4
STATE STANDARDS:
United States – TN – DISC: Stocks and bonds
United States – OH – Default City – TBA
TOPICS:
Expected and required returns
Bloom’s: Comprehension
OTHER:
TYPE: Multiple Choice: Conceptual
10/30/2017 8:23 PM
119. Stocks X and Y have the following data. Assuming the stock market is efficient and the stocks are in equilibrium,
which of the following statements is CORRECT?
X
Y
$25
$25
5%
3%
12%
10%
a.
Stock X pays a higher dividend per share than Stock Y.
b.
One year from now, Stock X should have the higher price.
c.
Stock Y has a lower expected growth rate than Stock X.
d.
Stock Y has the higher expected capital gains yield.
e.
Stock Y pays a higher dividend per share than Stock X.
ANSWER:
a
1
DIFFICULTY:
Difficulty: Moderate
Multiple Choice
HAS VARIABLES:
IFMG.DAVE.19.29.04 – LO: 29-4
and Management Science
United States – TN – DISC: Stocks and bonds
LOCAL STANDARDS:
United States – OH – Default City – TBA
Expected and required returns
KEYWORDS:
Bloom’s: Comprehension
OTHER:
TYPE: Multiple Choice: Conceptual
DATE CREATED:
10/30/2017 8:23 PM
DATE MODIFIED:
1/10/2018 11:43 AM
120. Merrell Enterprises’ stock has an expected return of 14%. The stock’s dividend is expected to grow at a constant rate
of 8%, and it currently sells for $50 a share. Which of the following statements is CORRECT?
a.
The stock’s dividend yield is 8%.
b.
The current dividend per share is $4.00.
c.
The stock price is expected to be $54 a share one year from now.
d.
The stock price is expected to be $57 a share one year from now.
e.
The stock’s dividend yield is 7%.
ANSWER:
c
for this question.
10/30/2017 8:23 PM
DATE MODIFIED:
1/10/2018 11:43 AM
POINTS:
Difficulty: Moderate
QUESTION TYPE:
Multiple Choice
LEARNING OBJECTIVES:
IFMG.DAVE.19.29.04 – LO: 29-4
and Management Science
STATE STANDARDS:
United States – TN – DISC: Stocks and bonds
United States – OH – Default City – TBA
TOPICS:
Dividend yield and g
KEYWORDS:
Bloom’s: Comprehension
NOTES:
Students may be able to correctly determine the answer to this question without [many]
121. Stocks A and B have the same price and are in equilibrium, but Stock A has the higher required rate of return. Which
of the following statements is CORRECT?
a.
Stock B must have a higher dividend yield than Stock A.
b.
Stock A must have a higher dividend yield than Stock B.
c.
If Stock A has a higher dividend yield than Stock B, its expected capital gains yield must be lower than Stock
B’s.
d.
Stock A must have both a higher dividend yield and a higher capital gains yield than Stock B.
e.
If Stock A has a lower dividend yield than Stock B, its expected capital gains yield must be higher than Stock
B’s.
ANSWER:
e
POINTS:
DIFFICULTY:
Difficulty: Moderate
Multiple Choice
HAS VARIABLES:
IFMG.DAVE.19.29.04 – LO: 29-4
and Management Science
United States – TN – DISC: Stocks and bonds
LOCAL STANDARDS:
United States – OH – Default City – TBA
Expected and required returns
KEYWORDS:
Bloom’s: Knowledge
OTHER:
TYPE: Multiple Choice: Conceptual
DATE CREATED:
10/30/2017 8:23 PM
DATE MODIFIED:
1/10/2018 11:43 AM
POINTS:
DIFFICULTY:
Difficulty: Moderate
HAS VARIABLES:
122. Two constant growth stocks are in equilibrium, have the same price, and have the same required rate of return.
Which of the following statements is CORRECT?
a.
If one stock has a higher dividend yield, it must also have a lower dividend growth rate.
b.
If one stock has a higher dividend yield, it must also have a higher dividend growth rate.
c.
The two stocks must have the same dividend growth rate.
d.
The two stocks must have the same dividend yield.
e.
The two stocks must have the same dividend per share.
ANSWER:
a
POINTS:
DIFFICULTY:
Difficulty: Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
LEARNING OBJECTIVES:
IFMG.DAVE.19.29.04 – LO: 29-4
and Management Science
STATE STANDARDS:
United States – TN – DISC: Stocks and bonds
LOCAL STANDARDS:
United States – OH – Default City – TBA
TOPICS:
Dividend yield and g
OTHER:
TYPE: Multiple Choice: Conceptual
DATE CREATED:
10/30/2017 8:23 PM
DATE MODIFIED:
1/10/2018 11:43 AM
123. Which of the following statements is CORRECT, assuming stocks are in equilibrium?
a.
Assume that the required return on a given stock is 13%. If the stock’s dividend is growing at a constant rate of
5%, its expected dividend yield is 5% as well.
b.
A stock’s dividend yield can never exceed its expected growth rate.
c.
A required condition for one to use the constant growth model is that the stock’s expected growth rate exceeds
its required rate of return.
d.
Other things held constant, the higher a company’s beta coefficient, the lower its required rate of return.
e.
The dividend yield on a constant growth stock must equal its expected total return minus its expected capital
gains yield.
ANSWER:
e
DATE CREATED:
10/30/2017 8:23 PM
DATE MODIFIED:
1/10/2018 11:43 AM
Difficulty: Moderate
QUESTION TYPE:
Multiple Choice
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.29.04 – LO: 29-4
STATE STANDARDS:
United States – TN – DISC: Stocks and bonds
124. Stocks A and B have the following data. The market risk premium is 6.0% and the risk-free rate is 6.4%. Assuming
the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT?
A
B
1.10
0.90
7.00%
7.00%
a.
Stock A must have a higher dividend yield than Stock B.
b.
Stock B’s dividend yield equals its expected dividend growth rate.
c.
Stock B must have the higher required return.
d.
Stock B could have the higher expected return.
e.
Stock A must have a higher stock price than Stock B.
ANSWER:
POINTS:
1
LEARNING OBJECTIVES:
IFMG.DAVE.19.29.04 – LO: 29-4
STATE STANDARDS:
United States – TN – DISC: Stocks and bonds
United States – OH – Default City – TBA
TOPICS:
Dividend yield and g
Bloom’s: Comprehension
OTHER:
TYPE: Multiple Choice: Conceptual
10/30/2017 8:23 PM
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Page 70
125. Which of the following statements is CORRECT?
a.
If CF0 is positive and all the other CFs are negative, then you cannot solve for I.
b.
If you have a series of cash flows, each of which is positive, you can solve for I, where the solution value of I
causes the PV of the cash flows to equal the cash flow at Time 0.
c.
If you have a series of cash flows, and CF0 is negative but each of the following CFs is positive, you can solve
for I, but only if the sum of the undiscounted cash flows exceeds the cost.
d.
To solve for I, one must identify the value of I that causes the PV of the positive CFs to equal the absolute
value of the PV of the negative CFs. This is, essentially, a trial-and-error procedure that is easy with a
computer or financial calculator but quite difficult otherwise.
e.
If you solve for I and get a negative number, then you must have made a mistake.
ANSWER:
d
DIFFICULTY:
Difficulty: Challenging
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.29.01 – LO: 29-1
United States – BUSPROG: o Reflective Thinking – BUSPROG: Analytic skills: Statistics
and Management Science
United States – TN – DISC: Time value of money
LOCAL STANDARDS:
United States – OH – Default City – TBA
TOPICS:
Solving for I: uneven CFs
Bloom’s: Knowledge
OTHER:
TYPE: Multiple Choice: Conceptual
for this question.
10/30/2017 8:23 PM
DATE MODIFIED:
1/10/2018 11:43 AM
126. Which of the following bank accounts has the highest effective annual return?
a.
An account that pays 8% nominal interest with daily (365-day) compounding.
b.
An account that pays 8% nominal interest with monthly compounding.
c.
An account that pays 8% nominal interest with annual compounding.
d.
An account that pays 7% nominal interest with daily (365-day) compounding.
e.
An account that pays 7% nominal interest with monthly compounding.
LOCAL STANDARDS:
United States – OH – Default City – TBA
Constant growth model: CAPM
KEYWORDS:
Bloom’s: Knowledge
OTHER:
TYPE: Multiple Choice: Conceptual
DATE CREATED:
10/30/2017 8:23 PM
DATE MODIFIED:
1/10/2018 11:43 AM
Chapter 29: Basic Financial Tools: A review
POINTS:
ANSWER:
a
POINTS:
DIFFICULTY:
Difficulty: Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
LEARNING OBJECTIVES:
IFMG.DAVE.19.29.01 – LO: 29-1
and Management Science
STATE STANDARDS:
United States – TN – DISC: Time value of money
LOCAL STANDARDS:
United States – OH – Default City – TBA
TOPICS:
Effective annual rate
KEYWORDS:
Bloom’s: Knowledge
OTHER:
TYPE: Multiple Choice: Conceptual
for this question.
DATE CREATED:
10/30/2017 8:23 PM
DATE MODIFIED:
1/10/2018 11:43 AM
127. You plan to invest some money in a bank account. Which of the following banks provides you with the highest
effective rate of interest?
a.
Bank 1; 6.1% with annual compounding.
b.
Bank 2; 6.0% with monthly compounding.
c.
Bank 3; 6.0% with annual compounding.
d.
Bank 4; 6.0% with quarterly compounding.
e.
Bank 5; 6.0% with daily (365-day) compounding.
ANSWER:
e
Difficulty: Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
United States – BUSPROG: o Reflective Thinking – BUSPROG: Analytic skills: Statistics
and Management Science
STATE STANDARDS:
United States – TN – DISC: Risk and return
LOCAL STANDARDS:
United States – OH – Default City – TBA
Port. risk & ret. relationships
KEYWORDS:
Bloom’s: Comprehension
128. Gretta’s portfolio consists of $700,000 invested in a stock that has a beta of 1.2 and $300,000 invested in a stock that
has a beta of 0.8. The risk-free rate is 6% and the market risk premium is 5%. Which of the following statements is
CORRECT?
a.
The required return on the market is 10%.
b.
The portfolio’s required return is less than 11%.
c.
If the risk-free rate remains unchanged but the market risk premium increases by 2%, Gretta’s portfolio’s
required return will increase by more than 2%.
d.
If the market risk premium remains unchanged but expected inflation increases by 2%, Gretta’s portfolio’s
required return will increase by more than 2%.
e.
If the stock market is efficient, Gretta’s portfolio’s expected return should equal the expected return on the
market, which is 11%.
ANSWER:
POINTS:
1
DIFFICULTY:
Difficulty: Challenging
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.29.01 – LO: 29-1
United States – BUSPROG: o Reflective Thinking – BUSPROG: Analytic skills: Statistics
and Management Science
United States – TN – DISC: Time value of money
LOCAL STANDARDS:
United States – OH – Default City – TBA
TOPICS:
Effective annual rate
Bloom’s: Knowledge
OTHER:
TYPE: Multiple Choice: Conceptual
for this question.
10/30/2017 8:23 PM
DATE MODIFIED:
1/10/2018 11:43 AM
129. Assume that the market is in equilibrium and that Portfolio AB has 50% invested in Stock A and 50% invested in
Stock B. Stock A has an expected return of 10% and a standard deviation of 20%. Stock B has an expected return of 13%
and a standard deviation of 30%. The risk-free rate is 5% and the market risk premium, rM − rRF, is 6%. The returns of
Stock A and Stock B are independent of one another, i.e., the correlation coefficient between them is zero. Which of the
following statements is CORRECT?
a.
Since the two stocks have zero correlation, Portfolio AB is riskless.
b.
Stock B’s beta is 1.0000.
c.
Portfolio AB’s required return is 11%.
d.
Portfolio AB’s standard deviation is 25%.
e.
Stock A’s beta is 0.8333.
ANSWER:
e
e is correct. Stock A’s required return is 10% = 5% + b(6%), so b = 5%/6% = 0.83333.
POINTS:
1
Difficulty: Challenging
Multiple Choice
HAS VARIABLES:
False
IFMG.DAVE.19.29.03 – LO: 29-3
United States – TN – DISC: Risk and return
LOCAL STANDARDS:
United States – OH – Default City – TBA
Port. risk & ret. relationships
KEYWORDS:
Bloom’s: Comprehension
TYPE: Multiple Choice: Conceptual
DATE CREATED:
10/30/2017 8:23 PM
1/10/2018 11:43 AM
130. Portfolio AB was created by investing in a combination of Stocks A and B. Stock A has a beta of 1.2 and a standard
deviation of 25%. Stock B has a beta of 1.4 and a standard deviation of 20%. Portfolio AB has a beta of 1.25 and a
standard deviation of 18%. Which of the following statements is CORRECT?
a.
Stock A has more market risk than Stock B but less stand-alone risk.
b.
Portfolio AB has more money invested in Stock A than in Stock B.
c.
Portfolio AB has the same amount of money invested in each of the two stocks.
d.
Portfolio AB has more money invested in Stock B than in Stock A.
e.
Stock A has more market risk than Portfolio AB.
ANSWER:
b
10/30/2017 8:23 PM
DATE MODIFIED:
1/10/2018 11:43 AM
1
DIFFICULTY:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
United States – TN – DISC: Time value of money
LOCAL STANDARDS:
TOPICS:
Bloom’s: Knowledge
OTHER:
DATE MODIFIED:
131. Ellen now has $125. How much would she have after 8 years if she leaves it invested at 8.5% with annual
compounding?
a.
$205.83
b.
$216.67
c.
$228.07
d.
$240.08
e.
$252.08
ANSWER:
d
DIFFICULTY:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
United States – TN – DISC: Risk and return
LOCAL STANDARDS:
TOPICS:
Bloom’s: Knowledge
OTHER:
10/30/2017 8:23 PM
DATE MODIFIED:
POINTS:
1
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
132. JG Asset Services is recommending that you invest $1,500 in a 5-year certificate of deposit (CD) that pays 3.5%
interest, compounded annually. How much will you have when the CD matures?
a.
$1,781.53
b.
$1,870.61
c.
$1,964.14
d.
$2,062.34
e.
$2,165.46
ANSWER:
a
POINTS:
1
DIFFICULTY:
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.29.01 – LO: 29-1
STATE STANDARDS:
United States – TN – DISC: Time value of money
LOCAL STANDARDS:
TOPICS:
OTHER:
DATE CREATED:
10/30/2017 8:23 PM
DATE MODIFIED:
133. Cyberhost Corporation’s sales were $225 million last year. If sales grow at 6% per year, how large (in millions) will
they be 5 years later?
a.
$271.74
b.
$286.05
c.
$301.10
d.
$316.16
e.
$331.96
ANSWER:
c
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Page 76
134. How much would $1, growing at 3.5% per year, be worth after 75 years?
a.
$12.54
b.
$13.20
c.
$13.86
d.
$14.55
e.
$15.28
ANSWER:
b
Difficulty: Easy
QUESTION TYPE:
Multiple Choice
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.29.01 – LO: 29-1
and Management Science
STATE STANDARDS:
United States – TN – DISC: Time value of money
United States – OH – Default City – TBA
TOPICS:
Bloom’s: Knowledge
TYPE: Multiple Choice: Problem
DATE CREATED:
10/30/2017 8:23 PM
1/10/2018 11:43 AM
135. Your bank offers a savings account that pays 3.5% interest, compounded annually. If you invest $1,000 in the
account, then how much will it be worth at the end of 25 years?
a.
$2,245.08
b.
$2,363.24
c.
$2,481.41
d.
$2,605.48
IFMG.DAVE.19.29.01 – LO: 29-1
United States – TN – DISC: Time value of money
LOCAL STANDARDS:
United States – OH – Default City – TBA
KEYWORDS:
Bloom’s: Knowledge
TYPE: Multiple Choice: Problem
10/30/2017 8:23 PM
DATE MODIFIED:
1/10/2018 11:43 AM
Chapter 29: Basic Financial Tools: A review
POINTS:
1
DIFFICULTY:
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
LOCAL STANDARDS:
TOPICS:
e.
$2,735.75
ANSWER:
b
POINTS:
1
DIFFICULTY:
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.29.01 – LO: 29-1
STATE STANDARDS:
United States – TN – DISC: Time value of money
LOCAL STANDARDS:
TOPICS:
KEYWORDS:
OTHER:
DATE CREATED:
10/30/2017 8:23 PM
DATE MODIFIED:
136. Suppose a State of New Mexico bond will pay $1,000 eight years from now. If the going interest rate on these 8-year
bonds is 5.5%, how much is the bond worth today?
a.
$651.60
b.
$684.18
c.
$718.39
d.
$754.31
e.
$792.02
ANSWER:
a
137. You expect to receive $5,000 in 25 years. How much is it worth today if the discount rate is 5.5%?
a.
$1,067.95
b.
$1,124.16
c.
$1,183.33
d.
$1,245.61
e.
$1,311.17
ANSWER:
e
POINTS:
1
QUESTION TYPE:
Multiple Choice
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.29.01 – LO: 29-1
STATE STANDARDS:
United States – TN – DISC: Time value of money
TOPICS:
OTHER:
TYPE: Multiple Choice: Problem
DATE CREATED:
10/30/2017 8:23 PM
138. Suppose a Google.com bond will pay $4,500 ten years from now. If the going interest rate on safe 10-year bonds is
4.25%, how much is the bond worth today?
a.
$2,819.52
b.
$2,967.92
c.
$3,116.31
d.
$3,272.13
e.
$3,435.74
ANSWER:
b
KEYWORDS:
Bloom’s: Knowledge
DATE CREATED:
10/30/2017 8:23 PM
DATE MODIFIED:
1/10/2018 11:43 AM
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139. You have purchased a U.S. Treasury bond for $3,000. No payments will be made until the bond matures 10 years
from now, at which time it will be redeemed for $5,000. What interest rate will you earn on this bond?
a.
3.82%
b.
4.25%
c.
4.72%
d.
5.24%
e.
5.77%
ANSWER:
d
1
Difficulty: Easy
QUESTION TYPE:
Multiple Choice
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.29.01 – LO: 29-1
United States – BUSPROG: o Reflective Thinking – BUSPROG: Analytic skills: Statistics
and Management Science
STATE STANDARDS:
United States – TN – DISC: Time value of money
United States – OH – Default City – TBA
TOPICS:
Finding I
Bloom’s: Knowledge
TYPE: Multiple Choice: Problem
DATE CREATED:
10/30/2017 8:23 PM
1/10/2018 11:43 AM
140. Wildwoods, Inc. earned $1.50 per share five years ago. Its earnings this year were $3.20. What was the growth rate
in earnings per share (EPS) over the 5-year period?
1
DIFFICULTY:
Difficulty: Easy
Multiple Choice
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.29.01 – LO: 29-1
and Management Science
United States – TN – DISC: Time value of money
United States – OH – Default City – TBA
TOPICS:
Bloom’s: Knowledge
OTHER:
TYPE: Multiple Choice: Problem
10/30/2017 8:23 PM
1/10/2018 11:43 AM
Chapter 29: Basic Financial Tools: A review
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Page 80
a.
15.54%
b.
16.36%
c.
17.18%
d.
18.04%
e.
18.94%
ANSWER:
b
1
DIFFICULTY:
Difficulty: Easy
QUESTION TYPE:
Multiple Choice
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.29.01 – LO: 29-1
STATE STANDARDS:
United States – TN – DISC: Time value of money
United States – OH – Default City – TBA
TOPICS:
Growth rate
Bloom’s: Analysis
OTHER:
TYPE: Multiple Choice: Problem
DATE CREATED:
10/30/2017 8:23 PM
1/10/2018 11:43 AM
141. You are hoping to buy a new boat 3 years from now, and you plan to save $4,200 per year, beginning one year from
today. You will deposit your savings in an account that pays 5.2% interest. How much will you have just after you make
the 3rd deposit, 3 years from now?
a.
$11,973
b.
$12,603
c.
$13,267
d.
$13,930
e.
$14,626
ANSWER:
c
1
DIFFICULTY:
Difficulty: Easy
HAS VARIABLES:
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.29.01 – LO: 29-1