Homework: Cost Accounting
1) What is the present value of a constant perpetuity of 25 per year where the required rate of return is 5%?
a) 193.61
b) 22.73
c) 500.00
d) 250.00
2) Calculate the 2 year annuity factor if the required rate of return is 10%.
a) 2.486
b) 1.736
c) 0.091
d) 0.826
3) What is the present value of a cash inflow of 1250 four years from now if the required rate of return is 8% (Rounded to 2 decimal places)?
a) 918.79
b) 938.75
c) 835.75
d) 992.50
4) What is the future value of 875 six years from now if the required rate of return is 7% (Rounded to 2 decimal places)?
a) 1550.50
b) 1147.13
c) 1281.00
d) 1313.14
5) If the present value of a growing perpetuity is 214, the required rate of return is 10%, and growth rate is 3%, what is the cash flow in year 1? (Round to the nearest whole number).
a) 3057
b) 15
c) 21
d) 6
6) If a bond is trading at a premium, what is the relationship between the bond's coupon rate, current yield and yield to maturity?
a) Coupon Rate < Current Yield < Yield to Maturity
b) Coupon Rate > Current Yield > Yield to Maturity
c) Coupon Rate > Yield to Maturity > Current Yield
d) Coupon Rate = Current Yield = Yield to Maturity
7) What is the current yield on a 3 year bond with 10% annual coupons, a par value of 100, and a current price of 107.87?
a) 7.37%
b) 7.00%
c) 9.27%
d) 10.00%
8) What is the yield to maturity for a 3 year bond with a 10% annual coupon if the bond is trading at par?
a) 9.00%
b) 11.00%
c) 10.00%
d) 9.75%
9) What is the price of a two year bond with a 9% annual coupon and a yield to maturity of 8%?
a) 97.51
b) 101.78
c) 105.25
d) 102.53
10) What is the definition of yield to maturity?
a) The return the investor gets from the income component of a bond as a percent of it's current price
b) The overall return the investor makes if they purchase a bond today and hold to maturity
c) The overall return the investor makes as a percent of a bond's par value
d) The return the investor gets from the income component of a bond as a percent of it's par value
11) What is the weight of capital for ABC Limited which has the following capital structure? $5m of equity with a cost of equity of 15%; $2m of mezzanine finance with a cost of 9.5%; $1m of senior debt with a cost of debt of 7%
a) 13.73%
b) 8.63%
c) 9.56%
d) 12.63%
12) What is the expected share return given the following macro) economic probabilities? Probability of recession 20% - Share return 5%; Probability of steady state 60% - Share return 10%; Probability of boom 20% - Share return 15%
a) 7%
b) 12%
c) 8%
d) 10%
13) Calculate a four) day moving average for the price of the stock for the end of Day 7. Day 1 - 62.00; Day 2 - 56.00; Day 3 - 50.00; Day 4 -60.00; Day 5 - 59.00; Day 6 - 55.00; Day 7 - 59.00; Day 8 - 63.00
a) 56.25
b) 57.00
c) 58.25
d) 59.00
14) Calculate a three) day weighted moving average for the price of the stock for the end of Day 7 where the most recent price has a weight of 3, the next has a weight of 2, and the oldest price has a weight of 1. Day 1 - 62.00; Day 2 - 56.00; Day 3 - 50.00; Day 4 - 60.00; Day 5 - 59.00; Day 6 - 55.00; Day 7 - 59.00; Day 8 - 63.00
a) 57.17
b) 57.83
c) 56.00
d) 57.67
15) An insurance company has provided you with a sample of paid claims. The sample includes the following claims: 192, 113, 200, 287, and 225. What are the mean and the variance respectively of this sample rounded to nearest whole number?
a) 210, 3942
b) 210, 63
c) 203, 63
d) 203, 3942
16) In the simple linear regression equation y = α + βx + ε, what is β?
a) The error term
b) The slope of the line of best fit
c) The independent variable
d) The y intercept
17) Covariance is best described as:
a) a measure of how much two sets of numbers change together
b) a measure of how far one set of numbers are spread out from each other
c) a weighted average of all possible values that a variable can take on
d) the square root of the variance
18) What does a diagram of a perfectly positive correlation look like?
a) A curved line that slopes from the bottom left to the top right quardrant
b) A perfectly straight line that slopes from the bottom left to the top right quardrant
c) A perfectly straight line that slopes from the top left to the bottom right quardrant
d) A scatter plot that have dots all over the place
Format your homework according to the give formatting requirements:
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