Question 1) For a share of stock, the projected selling price one year from now (P1) is $125.00, the projected dividend payment one year from now (Dl) is $4.25, and the investors' required rate of return for the stock is 14%. The estimated selling price of this stock is:
a. $109.65.
b. $120.75.
c. $113.38.
d. none of the above
Question 2) If you were to borrow $10,000 over five years at 12 percent compounded monthly, which is the correct loan payment to be made monthly?
a. $122
b. $222
c. $168
d. $187
Question 3) The principal function of financial statements is to:
a. convey information to managers, investors, and creditors.
b. provide benchmark information for projecting the firm's future performance.
c. inform the firm's shareholders of its likely prospects for growth and cash flows.
d. all of the above
Question 4) Assume that interest rates are expected to be 5 percent in years 1 and 2, 6 percent in year 3, 7 percent in year four, and 7.5 percent in year 5. If you were to make a five-year loan, the appropriate rate of interest to charge under the expectations theory would be:
a. 6.375%.
b. 6.100%.
c. 6.250%.
d. none of the above
Question 5) Because bond prices are sensitive to changes in interest rates:
a. it stands to reason that bonds hardly ever sell in the secondary market at their face value.
b. it is not often that market interest rates and the bond's coupon rates are equal.
c. interest rates in excess of the coupon rate cause the bond to sell at a discount, whereas interest rates below the coupon rate cause the bond to sell at a premium.
d. all of the above
Question 6) A firm using sales as its base has an inventory turn ratio of 4.0 times, a current ratio of 3.1:1, and a quick asset ratio of 2.2:1. The firm has no long-term debt and has a debt ratio of 40 percent. If the firm's assets total $500,000, the firm's sales are:
a. $2,000,000.
b. $180,000.
c. $200,000.
d. $720,000.
Question 7) You are considering an investment that requires an immediate payment of $1 0,000, and a payment one year from now of another $10,000. If you are promised $23,000 in two years, what would be the minimum required rate of return that would make this investment acceptable to you?
a. 12.00%
b. 9.00%
c. 15.00%
d. none of the above
Question 8) A statistic known as a stock's beta coefficient is commonly considered to be:
a. the variation anticipated in a stock's return that accompanies the variation anticipated in the returns of the market.
b. an index of systematic risk.
c. a coefficient of unsystematic risk.
d. none of the above
Question 9) Assume the market's required rate of return for a stock is 15.0 percent, the projected selling price of the stock in one year is $22.00, and the estimated per share dividend in one year is $1.00. The selling price of the stock today is:
a. $21.00.
b. $18.00.
c. $20.00.
d. none of the above
Question 10) A bond is available for purchase that has a face value of $1 0,000, an 8 percent coupon, payable semiannually, and 20 years of its original 25 years left to maturity. How much would you pay for the bond today if the market's required yield is 10 percent?
a. $8,184.60
b. $8,296.88
c. $8,283.64
d. $8,174.36