Fin 307
Which of the following appears to be the most appropriate goal for corporate management?
Maximizing the market value of shareholders' equity
Approximately how much must be saved for retirement in order to withdraw $100,000 per year for the next 25 years if the balance earns 8% annually, and the first payment occurs one year from now?
$1,067,477.62
You will be receiving cash flows of: $1,000 today, $2,000 at end of year 1, $4,000 at end of year 3, and $6,000 at end of year 5. What is the present value of these cash flows at an interest rate of 7%?
$10,412.27
An investment offers to pay $100 a year forever starting at the end of year 1. If the interest rate is 8%, what is the investment's value today?
$1250
Your real estate agent mentions that homes in your price range require a payment of $1,200 per month for 30 years at 9% interest. What is the size of the mortgage with these terms?
$149,183.24
Miller's Hardware plans on saving $42,000, $54,000, and $58,000 at the end of each year for the next three years, respectively. How much will the firm have saved at the end of the three years if it can earn 4.5% on its savings?
$160,295.05
If $120,000 is borrowed for a home mortgage, to be repaid at 9% interest over 30 years with monthly payments of $965.55, how much interest is paid over the life of the loan?
$227,598
How much must be invested today in order to generate a 5-year annuity of $1,000 per year, with the first payment 1 year from today, at an interest rate of 12%?
$3,604.78
How much must be saved at the end of each year for the next 10 years in order to accumulate $50,000, if you can earn 9% annually? Assume you contribute the same amount to your savings every year.
$3291
Approximately how much should be accumulated by the beginning of retirement to provide a $2,500 monthly check that will last for 25 years, during which time the fund will earn 6% interest with monthly compounding?
$388,017.16
How much can be accumulated for retirement if $2,000 is deposited annually, beginning 1 year from today, and the account earns 9% interest compounded annually for 40 years?
$675,764.89
What will be the monthly payment on a home mortgage of $75,000 at 12% interest, to be amortized over 30 years?
$771.46
How much should you be prepared to pay for a 10-year bond with a 6% coupon, semiannual payments, and a yield of 7.5%?
$895.78
How much will accumulate in an account with an initial deposit of $100, and which earns 10% interest compounded quarterly for 3 years?
134.49
Salad Daze maintains an inventory of produce worth $400. Its total bill for produce over the course of the year was $73,000. How old on average is the lettuce it serves its customers?
2 days
Chik's Chickens has average accounts receivable of $6,333. Sales for the year were $9,800. What is its average collection period?
235.48 days
Assume the total expense for your current year in college equals $20,000. How much would your parents have needed to invest 21 years ago in an account paying 8% compounded annually to cover this amount?
3973.11
How long will it take for $400 to grow to $1,000 at the following interest rates? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
4% takes 23.36 years 8% takes 11.91 years 16% takes 6.17 years
What will be the approximate population of the United States, if its current population of 300 million grows at a compound rate of 2% annually for 25 years?
492 million
You will require $700 in 5 years. If you earn 5% interest on your funds, how much will you need to invest today in order to reach your savings goal? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
548.27
If a bond offers an investor 11% in nominal return during a year in which the rate of inflation is 4%, then the investor's real return is:
6.73%
Calculate the average collection period for Dots Inc. if its accounts receivables were $550 at the beginning of a year in which the firm generated $3,000 of sales?
67 days
A bond has a coupon rate of 8%, pays interest semiannually, sells for $960, and matures in 3 years. What is its yield to maturity?
9.57%
Which one of the following would be considered a capital budgeting decision?
Deciding to expand into a new line of products, at a cost of $5 million
Find the interest rate implied by the following combinations of present and future values: (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Enter your answers as a whole percent.)
PV Yrs FV IR $400 11 $684 5% $183 4 $249 8% $300 7 $300 0%
An investor holds two bonds, one with 5 years until maturity and the other with 20 years until maturity. Which of the following is more likely if interest rates suddenly increase by 2%?
The 20-year bond will decrease more in price.
A famous quarterback just signed a $15 million contract providing $3 million a year for 5 years. A less famous receiver signed a $14 million 5-year contract providing $4 million now and $2 million a year for 5 years. The interest rate is 10%. a) What is the PV of the quarterback's contract? b) What is the PV of the receiver's contract?
a) 11.37 million b) 11.58 million
a.What is the company's debt-equity ratio? b.What is the ratio of long-term debt to total long-term capital? c.What is its net working capital? d.What is its current ratio?
a. 2.15 b. .60 c. $40 d. 1.67
Compute the present value of a $100 cash flow for the following combinations of discount rates and times: (Do not round intermediate calculations. Round your answers to 2 decimal places.)
a. r = 8%, t = 10 years PV: $46.32 b. r = 8%, t = 20 years PV: $21.45 c. r = 4%, t = 10 years PV: $67.56 d. r = 4%, t = 20 years PV: $45.64
Compute the future value of a $100 cash flow for the following combinations of rates and times. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
a.r = 8%, t = 10 years$ FV: $215.89 b.r = 8%, t = 20 years$ FV: $466.10 c.r = 4%, t = 10 years$ FV: $148.02 d.r = 4%, t = 20 years FV: $219.11
You take out a car loan of $8,000 that calls for 48 monthly payments starting after 1 month at an APR of 10%. a) What is your monthly car payment? b) What is the effective annual interest rate on the loan? c) If the payments are made in four annual year-end installments, what annual payment would have the same present value as the monthly payment you calculated?
a: $202.75 b: 10.47% c: $2525.77
a. If you borrow $1,000 and agree to repay the loan in five equal annual payments at an interest rate of 12%, what will your payment be? b. What will your payment be if you make the first payment on the loan immediately instead of at the end of the first year?
a: $277.41 b: $247.69
Assume you take out a car loan of $8,000 that calls for 48 monthly payments of $240 each. a) What is the APR of the loan? b) What is the effective annual interest rate on the loan?
a: APR is 19.2% b: EAR is 20.98%
Securities with a life greater than one year are traded in
capital market
Financial markets and intermediaries:
channel savings to real investment.
Which one of these is a money market security?
commercial paper
Periodic receipts of interest by the bondholder are known as:
coupon payments
A firm's long term assets = $75,000, total assets = $150,000, inventory = $25,000 and current liabilities = $50,000. Which of the following ratios are correct.
current ratio = 1.5; quick ratio = 1.0
An example of a firm's financing decision would be:
deciding whether or not to repurchase 3 million shares of common stock
The present value of a perpetuity can be determined by:
dividing the payment by the interest rate.
High levels of current ratio are most apt to indicate:
inefficient use of cash and other short-term assets.
If a bond is priced at par value, then:
its coupon rate equals its yield to maturity.
Short-term financing decisions commonly occur in the:
money markets.
If a bond with face value of $1,000 and a coupon rate of 8% is selling at a price of $970, is the bond's yield to maturity more or less than 8%?
more than 8%
Which one of these ratios is commonly referred to as the acid-test ratio?
quick ratio
Corporate financing comes ultimately from:
savings by households and foreign investors
A primary market would be utilized when:
securities are initially issued.
When market interest rates exceed a bond's coupon rate, the bond will:
sell for less than par value.
Which one of these parties cannot invest in a hedge fund?
small retail investors
A bond's payment at maturity is referred to as its face value.
true
Net working capital is determined from the difference between current assets and current liabilities. Group starts
true
Net working capital to total assets and current ratio are both liquidity ratios.
true
The asset turnover ratio and inventory turnover ratio are both efficiency ratios. Group starts
true
The discount rate that makes the present value of a bond's payments equal to its price is termed the:
yield to maturity