1. A "make-whole" call provision on a bond provides for:
a call price equal to the face value.
decreasing call prices as interest rates decrease.
call prices that vary with the funds available in a sinking fund.
a call price equal to the bond's approximate market value at the time of call.
a call price equal to the face value plus all accrued interest to date.
2. Toni's Tools is comparing machines to determine which one to purchase. The machines sell for differing prices, have differing operating costs, differing machine lives, and will be replaced when worn out. These machines should be compared using:
the replacement parts approach.
net present value only.
both net present value and the internal rate of return.
the equivalent annual cost method.
the depreciation tax shield approach.
3. A market participant who buys and sells securities from inventory is called a:
capitalist.
broker.
trader.
principal.
dealer.
4. If the nominal rate of return on a bond is 8.59 percent and the real rate is 3.87 percent, what is the rate of inflation?
5.39%
12.46%
13.82%
6.87%
4.54%
5. A project produces annual net income of $9,500, $12,500, and $15,500 over its 3-year life. The initial cost of the project is $210,000. This cost is depreciated straightline to a zero book value over three years. What is the average accounting rate of return if the required discount rate is 12.25 percent?
11.90%
14.80%
17.62%
14.32%
23.49%
6. Corporate dividends:
are only 70 percent taxable to corporate shareholders.
are a source of tax-free income for individual investors.
are paid out of pre-tax income and thus are taxed at the personal level.
are taxed at the personal level even though they are paid from aftertax income.
reduce the taxable income of the payer.