Question 2
If you invest $8,000 at 11% interest, how much will you have
in 9 years?
Question options:
$123,328
$24,032
$20,464
$18,824
Question 7
To save for her newborn son's college education, Lea Wilson will
invest $1,000 at the beginning of each year for the next 18 years.
The interest rate is 7 percent. What is the future value at the end
of 18 years?
Question options:
$37,450
$37,379
$33,999
$3,380
incorrect
Question 8
Mr. Blochirt is creating a college investment fund for his
daughter. He will put in $850 per year for the next 15 years and
expects to earn a 9% annual rate of return. How much money
will his daughter have when she starts college?
Question options:
$23,079
$22,263
$24,957
$11,250
Question 10
0 / 3 points
Dr. J. wants to buy a Dell computer which will cost $2,988 four
years from today. He would like to set aside an equal amount at
the end of each year in order to accumulate the amount needed.
He can earn 5% annual return. How much should he set aside?
Question options:
$693.27
$531.81
$823.15
$627.93
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Question 11
0 / 3 points
Mr. Fish wants to build a house in 12 years. He estimates that the
total cost will be $190,000. If he can put aside $10,000 at the
end of each year, what rate of return must he earn in order to
have the amount needed?
Question options:
14%
7%
Between 8% and 9%
Between 11% and 12%
incorrect
Question 12
0 / 3 points
Babe Ruth Jr. has agreed to play for the Cleveland Indians for $3
million per year for the next 10 years. What table would you use
to calculate the value of this contract in today's dollars?
Question options:
Present value of a
single amount
Present value of an
annuity
Future value of an
annuity
None of the above
incorrect
Question 14
0 / 3 points
Mr. Darden is selling his house for $155,000. He bought it for
$66,000 nine years ago. What is the annual return on his
investment?
Question options:
13%
Between 9% and 10%
Between 14% and 16%
Between 10% and 11%
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Question 15
0 / 3 points
Joe Nautilus has $120,000 and wants to retire. What return must
his money earn so he may receive annual benefits of $20,000 for
the next 12 years.
Question options:
Less than 12%
Greater than 15%
Between 12% and 13%
14%
Question 17
0 / 3 points
After 16 years, 100 shares of stock originally purchased for
$1000 was sold for $7,000. What was the yield on the
investment? Choose the closest answer.
Question options:
13%
5%
8%
19%
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Question 18
0 / 3 points
The future value of a $1000 investment today at 8 percent annual
interest compounded semiannually for 7 years is
Question options:
$1,714
$1,480
$1,732
$1,469
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Question 20
0 / 3 points
A ten-year bond, with par value equals $1000, pays 8% annually.
If similar bonds are currently yielding 4% annually, what is the
market value of the bond? Use semi-annual analysis.
Question options:
$1,324.88
$1,000.00
$1,327.04
$1297.85
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Question 23
0 / 3 points
A ten-year bond pays 11% interest on a $1000 face value
annually. If it currently sells for $1,105, what is its approximate
yield to maturity?
Question options:
9.36%
7.94%
12.66%
8.10%
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Question 25
0 / 3 points
What is the approximate yield to maturity for a seven-year bond
that pays 11% annual interest on a $1000 face value if the bond
sells for $932?
Question options:
10.6%
12.48%
12.0%
11.0%
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Question 26
0 / 3 points
The growth rate for the firm's common stock is 7%. The firm's
preferred stock is paying an annual dividend of $5. What is the
preferred stock price if the required rate of return is 6%?
Question options:
$62.5
$5
$500
none of the above
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Question 28
0 / 3 points
An issue of common stock has just paid a dividend of $3.75. Its
growth rate is 8%. What is its price if the market's rate of return
is 14%?
Question options:
$46.88
$62.50
$50.63
none of the above
Question 30
0 / 3 points
An issue of common stock is expected to pay a dividend of $4.50
at the end of the year. Its growth rate is equal to 3%, and the
current share price is $40. What is the required rate of return on
the stock?
Question options:
between 12% and 14%
between 14% and 17%
between 7% and 10%
between 10% and 12%
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Question 32
0 / 3 points
Buchanan Corp. is refunding $12 million worth of 10% debt. The
new bonds will be issued for 8%. The corporation's tax rate is
34%. The call premium is 8%. What is the net cost of the call
premium?
Question options:
$326,400
$633,600
$960,000
$702,000
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Question 33
0 / 3 points
With regard to interest rates and bond prices it can be said that
Question options:
a decrease in interest rates will cause bond prices to fall.
long-term rates are more volatile than short-term rates.
a 1% change in interest rates will cause a greater change in
long-term bond prices than short-term prices.
a 1% change in interest rates will cause a greater change in
short-term bond prices than long-term prices.
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Question 34
0 / 3 points
A bond with a coupon rate of 7.5%, maturing in 10 years at a
value of $1,000 and a current market price of $850, will have a
yield to maturity (using the approximation formula) of:
Question options:
between 9.5% and 10%
between 11% and 11.5%
between 10% and 10.5%
between 10.5% and 11%
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Question 37
0 / 3 points
From the corporate issuer viewpoint, a zero-coupon bond allows
the firm to:
Question options:
reduce the multiplier of the initial
investment.
Take advantage of low volatility.
defer payment obligations
receive deferred income for tax purposes.
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Question 43
0 / 3 points
The Harsanyi Corp. is considering four investments. Which
provides the highest after-tax return for Harsanyi Corp. if it is in
the 34% tax bracket?
Question options:
preferred stock at 6.0%
corporate bonds at 8.0%
municipal bonds at 5.0%
treasury bonds at 6.0%
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Question 44
0 / 3 points
Buggy Whip Manufacturing Company is issuing preferred stock
yielding 10%. Selten Corporation is considering buying the stock.
Buggy's tax rate is 0% due to continuing heavy tax losses, and
Selten's tax rate is 44%. What is the after-tax preferred yield for
Selten?
Question options:
10.0%
3.4%
8.68%
8.98%
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Question 45
0 / 3 points
Which of the following is the correct order of corporate issues
based on risk and return? (most risk-return to least risk-return)
Question options:
Preferred stock, common stock, subordinated
debentures, secured debt.
Common stock, subordinated debentures,
secured debt, treasury bills.
Common stock, long-term government bonds,
secured debt, subordinated debt.
Common stock, secured debt, subordinated
debentures, preferred stock.
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incorrect
Question 48
A stock is said to sell "ex-rights"
0 / 3 points
Question options:
after the rights have all been exercised and the
new issue is completely sold.
when transfer of stock ownership no longer
carries with it the privilege of subscription.
after the terms of the subscription have been
made public.
when the period in which the subscription
privilege is to be exercised has expired.
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Question 48
A stock is said to sell "ex-rights"
0 / 3 points
Question options:
after the rights have all been exercised and the new issue is
completely sold.
when transfer of stock ownership no longer carries with it the
privilege of subscription.
after the terms of the subscription have been made public.
when the period in which the subscription privilege is to be
exercised has expired.
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