Question 1. 1. If I have invested $100 for 3 years at 5%, how much will I have at the end of the period? (Points : 3) 

    $115.76

    $112.98

    $105.96

    $97.68

Question 2. 2. I have an investment that produces the following cash flows:

Year CF

1    $30,000

2    $23,000

3    $17,000

My required rate of return is 10%. Using that rate, convert this series of irregular cash flows to an equivalent (in present value terms) 3-year annuity. (Points : 4) 

    $23,333.33

    $23,746.22

    $25,000.19

    $15,908.39

Question 3. 3. Jinkumbumn, Inc., has an investment that offers the following cash flows:

$5,000 per year for years 1 through 6

$3,000 per year for years 7 through 10

$3,400 per year for years 11-20

Using a required rate of 14%, what would be the PV of this stream of cash flows? (Points : 3) 

    $23,456.98

    $31,403.36

    $28,209.53

    $19,087.09

Question 4. 4. Critics of stock options argue that those tend to distort executive decisions by emphasizing short term performance. (Points : 3) 

    The above statement is false

    The above statement is true but there are some ways to ensure that this cannot happen.

    Stock options are unrelated to stock performance so there is no possibility of them interfering with executive decisions

    Executives normally tend to be well wishers of stockholders and therefore a conflict cannot occur between the two.

Question 5. 5. Profit Maximization does not ignore risk the way wealth maximization does (Points : 3) 

    True 

    False 

Question 6. 6. In determining stockholder value, which of these are not listed as a factor in the textbook: (Points : 3) 

    Cash flow

    Timing of cash flows

    Risk

    Maximizing book value

Question 7. 7. Factors like interest rate levels, investor optimism and anticipated inflation can affect: (Points : 3) 

    stock prices

    book value of stock

    agency theory

    All of the above

Question 8. 8. The common stock of Walmart can be considered as a Money Market Security. (Points : 3) 

    True 

    False 

Question 9. 9. Which of the following is an example of over the counter market? (Points : 3) 

    NYSE

    AMEX

    NASDAQ

    The Cincinnati Stock Exchange

Question 10. 10. Sarbanes-Oxley Act: (Points : 3) 

    created the public company accounting standards board

    ensures independence of financial analysts

    made the top management directly responsible for the accuracy of the firm’s financial statements

    All of the above

Question 11. 11. The foreign currency price of one unit of home currency is known as the indirect quote. (Points : 3) 

    True 

    False 

Question 12. 12. Niroshan, Inc., has a Net Profit Margin of 3.8462%. If the company has an equity multiplier of 2.175 and an ROE of 12.5%, what would be its Total Asset Turnover? (Points : 3) 

    1.4942 approximately

    1.789 exactly

    0.984 approximately

    10.2%

Question 13. 13. For a service oriented company with no inventories at all but has actual receivables, it is possible that: (Points : 3) 

    Current ratio equals ROE

    Current Ratio equals ROI

    Current ratio equals receivables turnover ratio

    Current ratio equals quick ratio

Question 14. 14. If I am the bondholder of a company, I would be very interested in this ratio (choose the best answer): (Points : 3) 

    Total Asset Turnover

    Times Interest Earned ratio

    inventory turnover ratio

    Price to Earnings Ratio

Question 15. 15. When assessing ta company, a financial analyst must be mindful of the quality of a firm’s earnings and the quality of the firm’s balance sheet. (Points : 3) 

    True 

    False 

Question 16. 16. What is the future value of $1,000 invested today at the end of one year if the nominal rate is 10%. Assume that the interest is compounded semi-annually.  (Points : 3) 

    $1,100

    $1,102.50

    $1,092.09

    $1109.31

Question 17. 17. How long will it take for $7,752 to grow into $20,000 at an interest rate of 9%? (approximate to the nearest whole percent) (Points : 3) 

    11

    10

    9

    6

Question 18. 18. Jones Company sales last year were $25 million and its total assets were $8 million. Accounts payable were $2 million and common stock and retained earnings were $5 million. Jones sales are forecasted to be $30 million this year, earnings after tax are expected to be 3% of sales, and dividends of $250,000 are expected to be paid. Assuming that the ratio of assets to sales and current liabilities to sales remain the same this year as last year, determine the amount of additional financing required. (Points : 3) 

    $650,000

    $1,200,000

    $300,000

    None of the above

Question 19. 19. Which of the following (if any) are not financial intermediaries? (Points : 3) 

    commercial bank

    thrift institution

    securities broker

    insurance companies

    all are financial intermediaries

Question 20. 20. The main purpose of an economy’s financial system is to facilitate the transfer of funds from (Points : 3) 

    financial middlemen to financial intermediaries

    surplus spending units to deficit spending units

    primary claimholders to secondary claimholders

    lenders to financial intermediaries

Question 21. 21. Tinker Bell needs $5 million in exactly five years. If they can earn 9.5% per year. How much does the company have to deposit each year for five years to accumulate the amount at the end of five years? (Points : 3) 

    $1 million

    $900,039.27

    $827,182

    $768,945

Question 22. 22. Uncle Tim promised me to help with my college expenses. He gave me $5,000 today and promised me the same amount each year for the next three if I keep my grades up and stay in college. I am very confident of doing so. Using 10% as the discount rate, how much is this series of payments worth to me today? (Points : 3) 

    $15,849.33

    $17,434.26

    $12,362

    $11563.09

Question 23. 23. If the nominal rate is 16%, compounded quarterly, what would be the effective annual rate? (Points : 3) 

    19%

    64%

    17%

    12%

Question 24. 24. What is the future value of annuity due for a series of payments that pay $1,000 today, one year from today, two years from today and three years from today. Assume an interest rate of 9.3%. (Points : 3) 

    $4,593.40

    $9,098

    $5020.59

    $4,000

Question 25. 25. My boss asked me to prepare a cash budget for the company. My company purchased $500,000 worth of raw material in December. We normally pay 30% of the purchase price immediately and 30% in the month following the purchase. The rest is paid two months after purchase. How much of the December purchases would be paid in the following February? (Points : 3) 

    40%, $200,000

    30%, $150,000

    100%, $500,000

    10%, $50,000

Question 26. 26. Lenard Jim wants to spend $5,000 in the Mall of America for his 21st birthday next year. How much must he deposit in his bank today if his birthday is exactly one year from today and he can get 15% on the money deposited? (Points : 3) 

    $4567.91

    $3,452.36

    $4,000

    $4,347.83

Question 27. 27. As a dollar amount, the PV of any sum using a positive N and and I/Y would always be lesser than its future value. For example with a positive N and I/Y, $2,000 received 5 years from today would be lower in PV than $2,000. (Points : 3) 

    True 

    False 

Question 28. 28. Which of the following statements is untrue? (Points : 3) 

    Weak form efficiency suggests that stock prices reflect all historical information.

    Strong form Efficiency suggests that stock prices reflect all public and even private information.

    the market price of a stock has nothing to do with weak form information. One can get superior gains by simply looking at historical information.

    All of the above are true.

Question 29. 29. If an investor purchased 100 shares of Biggee stock for $30 per share, 6 months ago, and then sold the stock today for $33 per share, what was the investor’s holding period return if a total of $1 per share in dividends was received over the 6 month period? (Points : 3) 

    10%

    27.1%

    13.3%

    17.1%

Question 30. 30. Financial decisions should be consistent with the goal of shareholder wealth maximization. However, there may be a divergence between shareholder wealth maximization and the actual goals of management. The primary reason for this is: (Points : 3) 

    Management wants to ensure good public relations.

    The board of directors is increasingly becoming indifferent towards their corporations.

    Shareholders do not feel that wealth maximization is a relevant objective.

    There is a separation of ownership and control in corporations.

Question 31. 31. Which of the following is correct regarding the forms of market efficiency? I. In an efficient capital market stock prices provide an unbiased estimate of the true value of an enterprise. II. In an efficient capital market, stock prices do not reflect the present value of the firm’s expected cash flows. (Points : 3) 

    Only statement I is true

    Only statement II is true

    Both statements I and II are true

    Both statements I and II are untrue.

Question 32. 32. If a firm’s Return on Investment (EAT/TA) is 7%, and the firm has no preferred stock financing, it is: (Points : 3) 

    possible that ROE is 10%

    possible that ROE is 5%

    not possible for its debt to equity ratio to be 1.0.

    not possible for its net profit margin to be 7%

Question 33. 33. When you multiply net profit margin with fixed asset turnover and the equity multiplier ratio you get ROE. (Points : 3) 

    True 

    False