1. Assume the foreign exchange rate quotes are such that $1 is equal to 1.0428 units of Australian dollars and 0.7572 units of Euros. Also, those quotes can be expressed as Australian dollars 1.0428/$ and Euros 0.7572/$. How many Euros is needed to buy 1 unit of Australian dollar?
a. Euros 0.7262/Australian dollars
b. Australian dollars 6.6262/Euro
c. Australian dollars 1.3771/Euro
d. none of the answers is correct
e. Euros 4.5738/Australian dollar
2. Annuities in which the cash flows occur at the beginning of each of the specified time periods are known as:
a. single amount.
b. ordinary annuities.
c. none of the answers is correct.
d. perpetuity. e. annuities due.
3. Which of the following statement is correct?
a. The cost of preferred stock is negatively affected by the issuer's tax rate.
b. An increase in the market value (price) of a preferred stock will increase the cost of preferred stock.
c. Interest expense reduces a firm's tax liability and therefore this reduction in taxes reduces the cost of debt.
d. If market interest rates rise then both the cost of equity and debt will decrease.
e. All the answers are incorrect.