POST FIn201 exam
Solving for Rates What annual rate of return is earned on
a $3,600 investment when it grows to $7,700 in twenty years?
1.14%
3.87%
2.14%
3.69%
Present Value of a
Perpetuity A perpetuity
pays $250 per year and interest rates are 6.5 percent. How much would its value
change if interest rates increased to 9.0 percent?
$1,068.37
decrease
$625.00 increase
$1,068.37
increase
$625.00 decrease
Zero Coupon Bond Price Calculate the price of a zero coupon
bond that matures in 10 years if the market interest rate is 6 percent. (Round
your answer to 2 decimal places.)
$940.00
$558.39
$1,000.00
$553.68
Internal Growth Rate Last year Umbrellas Unlimited
Corporation had an ROA of 9.7% and a dividend payout ratio of 50.3%. What is
the internal growth rate?
94.09%
1%
2.16%
5.07%
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P/E Ratio and Stock
Price International
Business Machines (IBM) has earnings per share of $6.90 and a P/E ratio of
15.20. What is the stock price?
$44.20
$104.88
$.45
$2.20
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Income Statement Bullseye, Inc.’s 2008 income statement
lists the following income and expenses: EBIT = $907,500, Interest expense = $84,000,
and Net income = $580,500. What is the 2008 Taxes reported on the income
statement?
$327,000
$243,000
$823,500
There is not enough
information to calculate 2008 Taxes.
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Interest-on-Interest Consider a $1,400 deposit earning 11
percent interest per year for 8 years. How much total interest is earned on
interest (excluding interest earned on the original deposit)?
$1,826.35
$1,232.00
$594.35
$123.20
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Present Value of an
Annuity What is the
present value of a $1,400 annuity payment over 8 years if interest rates are 9
percent?
$8,393.35
$702.61
$2,789.59
$7,748.75
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Liquidity and Asset
Management Ratios Oasis Products,
Inc. has current liabilities = $9.9 million, current ratio = 1.90 times,
inventory turnover ratio = 12.4 times, average collection period = 24 days, and
sales = $110 million. What is the value of their cash and marketable securities?
(Consider a 365 days a year.)
$2,706,155
$8,870,968
$18,810,000
$16,064,813
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Compounding with
Different Interest Rates A
deposit of $740 earns interest rates of 10.4 percent in the first year and 7.4
percent in the second year. What would be the second year future value?
$871.72
$817.63
$877.42
$1,611.72
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Taxable Equivalent
Yield What’s the
taxable equivalent yield on a municipal bond with a yield to maturity of 5.2
percent for an investor in the 25 percent marginal tax bracket? (Round your
answer to 2 decimal places.)
20.80%
6.93%
1.30%
5.20%
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Debt Management Ratios Trina’s Trikes, Inc. reported a
debt-to-equity ratio of 1.86 times at the end of 2008. If the firm’s total debt
at year-end was $9.50 million, how much equity does Trina’s Trikes have?
$9.50 million
$5.11 million
$17.67 million
$1.86 million
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Future Value of an
Annuity What is the
future value of a $1,200 annuity payment over 10 years if the interest rates
are 8 percent?
$2,590.71
$17,383.87
$12,960.00
$13,723.07
Selling Stock with a
Limit Order You would like
to sell 100 shares of Pfizer, Inc.(PFE). The current bid and ask quotes are
$27.27 and $27.30, respectively. You place a limit sell-order at $27.29. If the
trade executes, how much money do you receive from the buyer?
$2,727
$5,457
$2,729
$2,730
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Future Value of an
Annuity Due If the future
value of an ordinary, 5-year annuity is $7,600 and interest rates are 8
percent, what’s the future value of the same annuity due?
$8,208.01
$7,037.04
$7,980
$7,600
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Determinants of
Interest Rate for Individual Securities The Wall Street Journal reports that the rate
on 3-year Treasury securities is 6.60 percent, and the 6-year Treasury rate is
6.85 percent. From discussions with your broker, you have determined that
expected inflation premium is 2.10 percent next year, 2.35 percent in Year 2,
and 2.55 percent in Year 3 and beyond. Further, you expect that real interest
rates will be 3.30 percent annually for the foreseeable future. What is the
maturity risk premium on the 6-year Treasury security?
1.20%
.75%
1.45%
1.00%
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Value of a Preferred
Stock If a preferred
stock from Ecology and Environment, Inc. (EEI) pays $19.50 in annual dividends,
and the required return on the preferred stock is 7.50 percent, what’s the
value of the stock?
$2.60
$260.00
$146.25
$1.46
Free Cash Flow You are considering an investment in
Crew Cut, Inc. and want to evaluate the firm’s free cash flow. From the income
statement, you see that Crew Cut earned an EBIT of $23.18 million, paid taxes
of $3.82 million, and its depreciation expense was $7.82 million. Crew Cut’s
gross fixed assets increased by $10.18 million from 2007 to 2008. The firm’s
current assets increased by $6.18 million and spontaneous current liabilities
increased by $3.82 million. What is Crew Cut’s operating cash flow, investment
in operating capital and free cash flow for 2008, respectively in millions?
$23.18, $11.64, $11.54
$23.18, $10.18, $13.00
$27.18, $12.54, $14.64
$27.18, $10.18, $17.00
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Time to Maturity A bond issued by a corporation on
September 1, 1989 is scheduled to mature on September 1, 2046. If today is
September 2, 2009, what is this bond’s time to maturity?
37 years
20 years
46 years
57 years
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Determinants of
Interest Rate for Individual Securities A particular security’s default risk premium is 4.50
percent. For all securities, the inflation risk premium is 3.25 percent and the
real interest rate is 3.50 percent. The security’s liquidity risk premium is
1.20 percent and maturity risk premium is 1.75 percent.
The security has no special covenants. What is the security’s equilibrium rate
of return?
2.84%
14.20%
13.00%
9.70%
