Finance final questions

As a Brockport University alumnus, you want to give back to the upstate community. You decide to donate to the Brockport Foundation 25 years from now, pledging $100,000. If you invest today at a rate of 7.5 percent compounded annually, how much should you set aside?

$16,397.91

You are purchasing a 15-year, zero coupon bond. The yield to maturity is 6.85 percent and the face value is $1,000. What is the current market price? Assume annual compounding.

$370.15

Zach invested $6,220 in an account that pays 11 percent simple interest. How much money will he have at the end of 40 years?

$404,305

Imagine you're studying viticulture at Cornell University. In 20 years, you dream of buying a $175,000 parcel of land near Seneca Lake. If you can invest a lump sum today at an interest rate of 6.6 percent, compounded annually, how much should you deposit?

$48,740.95

Daniel bonds have a face value of 1,000 and are currently quoted at 867.25. The bonds have coupon rate of 6.5 percent. What is the current yield on these bonds?

7.67%

Fifteen years ago, you invested $5,000. Today, it is worth $18,250. What annually compounded rate of interest did you earn?

9.01%

You're a recent graduate from the Finance program at SUNY Brockport, starting an Accounts Receivable job in Rochester in with a salary of $50,000. If the region sees consistent economic growth and you receive annual raises of 3.75 percent, what will your salary be 17 years from now?

$93,491

At 5 percent annually compounded interest, how long would it take to triple your money?

22.52 years

A (n) 9% APR with monthly compounding is closest to _____.

An EAR of 9.87%

When analyzing a project, scenario analysis is best suited to accomplishing which one of the following?

Identifying the potential range of reasonable outcomes

Which of the following is a limitation of the payback rule?

It does not consider the time value of money, it is arbitrary, and it does not consider cash flows occurring after the payback period.

Why is it possible for a corporation to enter contracts, acquire assets, incur obligations, and enjoy protection against the seizure of its property?

It is legally defined, artificial entity separate from its owners.

Why is it possible for a corporation to enter into contracts, acquire assets, incur obligations, and enjoy protection against the seizure of its property.

It is legally defined, artificial entity separate from its owners.

What is the main reason that public companies must follow the rules and format set out in the Generally Accepted Accounting Principles (GAAP) when creating financial statements?

It makes it easier to compare the financial results of different firms.

what is the main reason that it is necessary got public companies to follow the roles and format set out in the Generally Accepted Accounting Principles (GAAP) when creating financial statements?

It makes it easier to compare the financial results of different firms.

The interest earned on both the initial principal and the interest reinvested from prior periods is called:

compound interest

Over four-fifths of all U.S business revenue is generated by which type of firms

corporations

Over four-fifths of all U.S business revenue is generated by which type of firms?

corporations

Wright Market Research can borrow money at a rate of 6.8 percent per year. This interest rate is called the:

cost of debt.

Kerry just received the semiannual payment of $45 on a bond she owns. This is called the _______ payment

coupon

The price sensitivity of a bond to interest rate changes increases as the:

coupon rate decreases, and the time to maturity increases.

A firm's liquidity is measured with which of the following ratios?

current ratio

A firm's external financing need is met by:

debt and/or equity

Which one of the following is a source of cash?

decrease in inventory

Sensitivity analysis determines the:

degree to which the net present value reacts to changes in a single variable.

To compute the present value of a future cash flow you must ______.

discount it

The internal rate of return is the:

discount rate which causes the net present value of a project to equal zero.

Haylee is calculating the present value of a bonus she will receive next year. The process she is using is called:

discounting

Which of the following is NOT one of the financial statements that a publicly traded company must produce?

the statement of activities

Which of the following best describes why a firm produces financial statements?

to provide a means for interested outside parties such as creditors to obtain information about a firm, with an overview of the short- and long-term financial condition of a business.

Assume the current market price of a bond exceeds its par value of $1,000. Which one of these equations applies?

yield to maturity < coupon rate

You are borrowing $120 from your friend today and will pay $150 back to her 1 year from now. What is the sign (+ or -) of the Present Value of that money from your point of view?

-

You recently came across a historical document stating that in the year SUNY Brockport was founded, $7,440 was invested for its benefit at an interest rate of 9 percent, compounded annually. How much would that investment be worth today, 60 years later?

1,309,673

Which of the following is the main advantage of using the dividend growth model (the equation on page 1) to estimate a firm's cost of equity?

the simplicity of the model.

Which of the following types of firms has limited liability

C corporations

Tesla bonds that can be paid off early at Tesla's discretion is referred is referred to as being which type of bond?

Callable

Which one of the following characteristics best describes a project that has a low degree of operating leverage?

High variable costs relative to the fixed costs

A firm's liquidity is measured with which one of the following ratios?

Current ratios

Which of the following is a use of cash?

Decrease in accounts payable

Which of the following is a source of cash?

Decrease in inventory

The process of determining the present value of future cash flows to know their value today is referred to as:

Discounted cash flow valuation.

Assume you are investing $100 today in a savings account as ESL Credit Union. Which of the following terms refers to the total value of this investment one year from now?

Future value

A bond's principal is repaid on the _____ date.

Maturity

A bond that is payable to whomever has physical possession of the bond is said to be a:

bearer bond

SUNY Brockport has several proposed independent projects that have positive NPV's. However, due to lack of financing, the College cannot initiate any projects. This situation is referred to as:

capital rationing

Ratios that measure a firm's liquidity are known as _______ ratios.

Short-term solvency

Janiya invested $2,000 six years ago at 4.5 percent interest. She spends all her interest earnings immediately, so she only receives interest on her initial $2,000 investment. Which type of interest is she earning?

Simple interest

Which of the following types of analysis is the most complex to conduct?

Simulation

Cracker Barrel has current assets of $112,000 and current liabilities of $117,000. Which of the following statements about that company is most likely true?

Since net working capital is negative, the company might not have enough funds to meet its obligations.

Cracker Barrel has current assets of $112,000 and current liabilities of $117,000. Which of the following statements about that company is most likely true?

Since net working capital is negative, the company will not have enough funds to meet its obligations.

The coding system established by the U.S government to classify companies by the nature of their business operations is known as the:

Standard Industrial Classification Codes

which of the following is typically the major factor in limiting the growth of sole proprietorships

The amount of money that can be raised by such firms is limited by the fact that the single owner must make good on all debts.

Which of the following amounts would be included on the right side of your balance sheet?

The amount of parking ticket you owe SUNY Brockport

what is the process of double taxation for the stockholders in a C corporation?

The corporation is taxed on its profits, and the owners are taxed when this profit is distributed to them.

What is the process of double taxation for the stockholders in a C corporation?

The owners of a corporation are taxed when they receive dividend payments and when they make a profit from the sale of shares.

Which of the following is NOT one of the financial statements that must be produced by a publicly traded company?

The statement of activities.

Activities of a firm that require the spending of cash are know as:

Uses of cash

Which statement accurately defines the effective annual rate (EAR) compared to the annual percentage rate (APR)?

While EAR considers more frequent compounding to give a true annual rate, APR represents the annual nominal or stated rate.

A bond that has only one payment, which occurs at maturity, defines which one of these types of bonds?

Zero coupon

When calculating a firm's weighted average cost of capital, the capital structure weights:

are based on the market values of debt and equity.

Fixed costs:

are constant over the short-run regardless of the quantity of output produced.

Which one of the following is the price at which a dealer will sell a bond?

ask price

Relationships determined from a company's financial information and used for comparison purposes are known as:

financial ratios

Faith won the New York State lottery and will receive $1,000,000 yearly for 30 years. The current value of these winnings is called the:

future value

Forecasting risk is the possibility that:

incorrect decisions will be made due to erroneous cash flow projections

The base-case values used in scenario analysis are the values considered to be the most:

likely to occur.

Ratios that measure how efficiently a firm manages its assets and operations to generate net income are referred to as _______ ratios.

profitability

The most acceptable method of evaluating the financial statements is to compare the company's current financial:

ratios to the company's historical ratios.

Which of the following do NOT have limited liability?

sole proprietorships

Which of the following amounts would be included on the right side of your balance sheet?

the amount of parking tickets you owe to SUNY Brockport

Adrew, Incorporated bonds mature in 17 years and have a coupon rate of 5.4 percent. If the market rate of interest increases, then the:

the market price of the bond will decrease

Cassidy, Inc. bonds mature in 12 years and have a coupon rate of 5.7 percent. If the market rate of interest increases, then the:

the market price of the bond will decrease.