FI 302

Debts to be paid more than one year from now are claims against the firm's assets: in other words, they are long-term liabilities. These claims are from ________ who have provided capital to the firm but whose entire repayment is not due during the coming year or operating cycle. A) banks and bondholders B) banks and stockholders C) stockholders and bondholders D) all long-term lenders

A) banks and bondholders

The common objective of borrowing and lending is to ________. A) make all parties better off B) gain a profit at the other's expense C) make a firm or individual appear more liquid than is really the case D) thwart regulatory authority

A) make all parties better off

A $100 deposit today that earns an annual interest rate of 8% is worth how much at the end of two years? Assume all interest received at the end of the first year is reinvested the second year. A) $100 B) $114.42 C) $116 D) $116.64

D) $116.64

10. Which of the following is NOT an activity of a financial institution or market? A) Bringing together buyers and sellers of financial assets B) Providing a market for the transaction of financial assets C) Providing information to buyers and/or sellers of financial assets D) All are activities of financial institutions.

D) All are activities of financial institutions.

________ is simply the interest earned in subsequent periods on the interest earned in prior periods. A) Quoted interest B) Anticipated interest C) Simple interest D) Compound interest

D) Compound interest

The income statement begins with revenue and subtracts various operating expenses until arriving at the intermediate point of ________. A) earnings after taxes B) net income C) taxable income D) EBIT

D) EBIT

11. Which of the statements below is TRUE? A) Accounting Identity is: Assets ≡ Liabilities - Owners' Equity. B) Accounting Identity is: Assets ≡ Liabilities + Owners' Equity. C) Accounting Identity is: Assets ≡ Owners' Equity - Liabilities. D) Accounting Identity is: Liabilities ≡ Assets + Owners' Equity

B) Accounting Identity is: Assets ≡ Liabilities + Owners' Equity.

Which of the following best identifies the four main areas of finance? A) Exchange rate management, investments, financial institutions and markets, international finance B) Corporate finance, investments, capital structure, international finance C) Corporate finance, investments, financial institutions and markets, international finance D) Corporate finance, capital budgeting, financial institutions and markets, regulation

C) Corporate finance, investments, financial institutions and markets, international finance

Your grandmother places $13,000 into an account earning an interest rate of 7% per year. After 5 years the account will be valued at $18,233.17. Which of the following statements is correct? A) The present value is $13,000, the time period is 7 years, the present value is $18,233.17, and the interest rate is 5%. B) The future value is $13,000, the time period is 5 years, the principal is $18,233.17, and the interest rate is 7%. C) The principal is $13,000, the time period is 5 years, the future value is $18,233.17, and the interest rate is 7%. D) The principal is $13,000, the time period is 7 years, the future value is $18,233.17, and the interest rate is 5%.

C) The principal is $13,000, the time period is 5 years, the future value is $18,233.17, and the interest rate is 7%.

12. Cash flow is ________. A) the increase but not decrease in cash for the period B) the decrease but not increase in cash for the period C) the increase or decrease in cash for the period D) the net income for the period

C) the increase or decrease in cash for the period

True or False A trend among universities is to guarantee tuition to incoming freshmen for a four-year period. Further, the annual amount due is collected in equal payments collected every three months. Although the payments are equal as well as equally spaced, this is NOT an example of an annuity because the payments are made every three months rather than on a monthly or annual basis.

False

True or False Even with an interest rate of 0.0%, the future value of a 5-year $800 annual annuity will be greater than the present value of the same annuity

False

True or False The basic accounting identity that assets equal liabilities plus owners' equity usually, but not always, holds.

False

True or False The basic function of financial intermediaries is to move advice from lenders to borrowers and back to lenders

False

True or False When solving for the future value of a stream of unequal cash flows, it is important to add together the values BEFORE applying the future value formula to determine their future value.

False

True or False Consider the TVM equation: Present value and time period are inversely related.

True

True or False Net income is not cash flow

True