no this one

Assume that you are considering the purchase of a 20-year, noncallable bond with an annual coupon rate of 9.5%. The bond has a face value of $1,000 and it makes semiannual interest payments. If you require an 8.4% nominal yield on this investment, what is the maximum price you should be willing to pay for the bond?

$1,105.69

Suppose you borrowed $15,000 at a rate of 8.5% and must repay it in 5 equal installments at the end of each of the next 5 years. How much would you still owe at the end of the first year, after you have made the first payment?

$12,468.51

You want to buy a new sports car 3 years from now, and you plan to save $4,200 per year, beginning one year from today. You will deposit your savings in an account that pays 5.2% interest. How much will you have just after you make the 3rd deposit, 3 years from now?

$13,267

A stock is expected to pay a dividend of %0.75 next year. The required rate of return is rs=10.5% and the expected constant growth rate is g = 6.4%. What is the stock's current price?

$18.29

What's the future value of $1,500 after 5 years if the appropriate rate is 6%, compounded semiannually?

$2,016

Sam was injured in an accident, and the insurance company has offered him the choice of $24,000 per year for 15 years, with the first payment being made today, or a lump sum. If a fair return is 7.5%, how large must the lump sum be to leave him as well off financially as with the annuity?

$227,739.69

Sue now has $125. How much would she have after 8 years if she leaves it invested at 8.5% with annual compounding?

$240.08

A stock just paind a dividend of Do = $1.50. The required rate of return is Rs = 10.1%, and the constant growth rate is g = 4%. What is the current stock price?

$25.57

How much would $100, growing at 5% per year, be worth after 75 years?

$3,883.27

Hartzell Inc. had the following data for 2012, in millions: Net income = $600; after-tax operating income [EBIT(1 − T)] = $700; and Total assets = $2,000. Information for 2013 is as follows: Net income = $825; after-tax operating income [EBIT(1 − T)] = $925; and Total assets = $2,500. How much free cash flow did the firm generate during 2013?

$425

You sold a car and accepted a note with the following cash flow stream as your payment. What was the effective price you received for the car assuming an interest rate of 6.0%?

$5,987

On 12/31/13, Hite Industries reported retained earnings of $525,000 on its balance sheet, and it reported that it had $135,000 of net income during the year. On its previous balance sheet, at 12/31/12, the company had reported $445,000 of retained earnings. No shares were repurchased during 2013. How much in dividends did the firm pay during 2013?

$55,000

Suppose a State of New York bond will pay $1,000 ten years from now. If the going interest rate on these 10-year bonds is 5.0%, how much is the bond worth today?

$613.91

Your sister turned 35 today, and she is planning to save $7,000 per year for retirement, with the first deposit to be made one year from today. She will invest in a mutual fund that's expected to provide a return of 7.5% per year. She plans to retire 30 years from today, when she turns 65, and she expects to live for 25 years after retirement, to age 90. Under these assumptions, how much can she spend each year after she retires? Her first withdrawal will be made at the end of her first retirement year.

$64,932

Suppose you are buying your first condo for $145,000, and you will make a $15,000 down payment. You have arranged to finance the remainder with a 30-year, fixed loan at 6.5% nominal interest rate. What will your monthly payments be?

$821.69

Refer to Exhibit 4.1. What is the firm's quick ratio?

0.64 Rationale: Quick ratio = (CA − Inventory)/CL = 0.64

Refer to Exhibit 4.1. What is the firm's P/E ratio?

12.0 Rationale: P/E ratio = Price per share/Earnings per share = 12.0 We actually fixed the P/E ratio at 12 in order to get a stock price. Either the price or the P/E ratio must be fixed or the model becomes very complicated and a stock pricing equation is required.

Your subscription to Investing Wisely Weekly is about to expire. You plan to subscribe to the magazine for the rest of your life, and you can renew it by paying $85 annually, beginning immediately, or you can get a lifetime subscription for $850, also payable immediately. Assuming that you can earn 6.0% on your funds and that the annual renewal rate will remain constant, how many years must you live to make the lifetime subscription the better buy?

14.33

MasterCard and other credit card issuers must by law print the Annual Percentage Rate (APR) on their monthly statements. If the APR is stated to be 18%, with interest paid monthly, what is the card EAR?

19.56%

Suppose the yield on a 10-year T-bond is currently 5.05% and that on a 10-year Treasury Inflation Protected Security (TIPS) is 1.80%. Suppose further that the MRP on a 10-year T-bond is 0.90%, that no MRP is required on a TIPS, and that no liquidity premium is required on any T-bond. Given this information, what is the expected rate of inflation over the next 10 years?

2.35%

A 5-year corporate bond yields 9%. A 5-year municipal bond of equal risk yields 6.5%. Assume that the state tax rate is zero. At what federal tax rate are you indifferent between the two bonds?

27.78%

Suppose the U.S. Treasury offers to sell you a bond for $747.25. No payments will be made until the bond matures 5 years from now, at which time it will be redeemed for $1,000. What interest rate would you earn if you bought this bond at the offer price?

6.00%

Your father paid $10,000 (CF at t = 0) for an investment that promises to pay $750 at the end of each of the next 5 years, then an additional lump sum payment of $10,000 at the end of the 5th year. What is the expected rate of return on this investment?

7.50%

Refer to Exhibit 4.1. What is the firm's BEP?

8.31% BEP = EBIT/Total assets = 8.31%

O'Brien Ltd.'s outstanding bonds have a $1000 par value, and they mature in 25 years. Their nominal yield to maturity is 9.25%, they pay interest semiannually, and they sell at a price of $975. What is the bond's nominal coupon interest rate?

8.99%

You recently sold 200 shares of Disney stock, and the transfer was made through a broker. This is an example of:

A secondary market transaction.

Which of the following best describes the annual percentage rate? A. The quoted annual interest rate which considered with the compounding period gives the effective interest rate B. The effective annual rate after compounding is taken into account C. The discount rate when compounded more than once a year or less than once a year D. The discount rate when it is divided by the number of times it is compounded in a year

A. The quoted annual interest rate which considered with the compounding period gives the effective interest rate

As a result of compounding, the effective annual rate on a bank deposit (or a loan) is always equal to or greater than the nominal (simple) annual rate on the deposit (or loan). A. True B. False

A. True

The payment made each period on an amortized loan is constant, and it consists of some interest and some principal. The closer we are to the end of the loan's life, the greater the percentage of the payment that will be a repayment of principal. A. True B. False

A. True

When computing a present value, which of the following is TRUE? A. You should adjust the discount rate to match the time period of the cash flows. B. You should adjust the future value to match the present value. C. You should adjust the time period to match the present value. D. You should adjust the cash flows to match the time period of the discount rate.

A. You should adjust the discount rate to match the time period of the cash flows.

Inflation, recession, and high-interest rates are economic events that are best characterized as being

Among the factors responsible for market risk

Which of the following bank accounts has the highest effective annual return?

An account that pays 8% nominal interest with daily (365-day) compounding

Considered alone, which of the following would increase a company's current ratio

An increase in accounts receivable

Which of the following statements regarding a 30-year monthly payment amortized (fixed-payment) mortgage with a nominal (simple) annual interest rate of 10% is CORRECT? A. The monthly payments will decline over time. B. A smaller proportion of the last monthly payment will be interest, and a larger proportion will be principal, than for the first monthly payment. C. The total dollar amount of principal being paid off each month gets smaller as the loan approaches maturity. D. The amount representing interest in the first payment would be higher if the nominal annual interest rate were 7% rather than 10%. E. Exactly 10% of the first monthly payment represents interest.

B. A smaller proportion of the last monthly payment will be interest, and a larger proportion will be principal, than for the first monthly payment.

What, typically, is used to calculate the opportunity cost of capital on a risk-free investment? A. The best available expected return offered in any investment available in the market B. The interest rate on U.S. Treasury securities with the same term C. The interest rate of any investments alternatives that are available D. The best rate of return offered by U.S. Treasury securities

B. The interest rate on U.S. Treasury securities with the same term

You plan to invest some money in a bank account. Which of the following banks provides you with the highest effective rate of interest?

Bank 5; 6.0% with daily (365-day) compounding. Rationale: By inspection, we can see that e dominates b, c, and d because, with the same interest rate, the account with the most frequent compounding has the highest EFF%. Thus, the correct answer must be either a or e. However, we cannot tell by inspection whether a or e provides the higher EFF%. We know that with one compounding period a's EFF% is 6.1%, so we can calculate e's EFF%. It is 6.183%, so e is the correct answer. a. = (1 + 0.061/12)12 − 1 = 6.100% e. = (1 + 0.06/365)365 − 1 = 6.183%

Which of the following statements is CORRECT?

Bond covenants are designed to protect bondholders and to reduce potential conflicts between stockholders and bondholders.

Which of the following statements is CORRECT?

Both Nasdaq dealers and "specialists" on the NYSE hold inventories of stocks.

Which of the following statements is CORRECT, assuming positive interest rates and other things held constant? A. An annuity that makes 5 payments of $250 each, with the first payment starting today, has a lower present value than that of a similar annuity (5 payments of $250 each) that makes its first payment one year from today. B. A 30-year, $150,000 amortized mortgage will have larger monthly payments than an otherwise similar 20-year mortgage. C. A typical investment's nominal (simple) annual interest rate will always be equal to or less than its effective annual rate. D. If an investment pays 10% nominal annual rate, compounded annually, its effective annual rate will be greater than 10%. E. Banks A and B offer the same nominal annual rate of interest, but A pays interest quarterly and B pays semiannually. Deposits in Bank B will have the higher future value if you leave the funds on deposit.

C. A typical investment's nominal (simple) annual interest rate will always be equal to or less than its effective annual rate.

Your bank account pays a 6% APR. The interest is compounded quarterly. Which of the following statements is CORRECT? A. The effective quarterly rate of interest is 1.5% and the EAR is 3%. B. The effective quarterly rate of interest is 6% and the EAR is greater than 6%. C. The effective quarterly rate of interest is 1.5% and the EAR is greater than 6%. D. The effective quarterly rate of interest is 3% and the EAR is 6%. E. The effective quarterly rate of interest is 6% and the EAR is also 6%.

C. The effective quarterly rate of interest is 1.5% and the EAR is greater than 6%.

A $50,000 loan is to be amortized over 7 years, with annual end-of-year payments. Which of these statements is CORRECT? A. The annual payments would be larger if the interest rate were lower. B. If the loan were amortized over 10 years rather than 7 years, and if the interest rate were the same in either case, the first payment would include more dollars of interest under the 7-year amortization plan. C. The proportion of each payment that represents interest would be lower if the interest rate were lower. D. The last payment would have a higher proportion of interest than the first payment. E. The proportion of interest versus principal repayment would be the same for each of the 7 payments.

C. The proportion of each payment that represents interest would be lower if the interest rate were lower.

Companies HD and LD have the same sales, tax rate, interest rate on their debt, total assets, and basic earning power. Both firms finance using only debt and common equity and total assets equal total invested capital. Both companies have positive net incomes. Company HD has a higher total debt to total capital ratio and, therefore, a higher interest expense. Which of the following statements is CORRECT?

Company HD pays less in taxes.

Which of the following items cannot be found on a firm's balance sheet under current liabilities?

Cost of goods sold.

Which of the following statements is FALSE? A. The investor's opportunity cost of capital is the best available expected return offered in the market on an investment of comparable risk and term of the cash flows being discounted. B. Interest rates we observe in the market will vary based on quoting conventions, the term of investment, and risk. C. The opportunity cost of capital is the return the investor forgoes when the investor takes on a new investment. D. For a risk-free project, the opportunity cost of capital will typically be greater than the interest rate of U.S. Treasury securities with a similar term

D. For a risk-free project, the opportunity cost of capital will typically be greater than the interest rate of U.S. Treasury securities with a similar term

Which of the following bank accounts has the highest effective annual return? A. An account that pays 8% APR with monthly compounding. B. An account that pays 8% APR with annual compounding. C. An account that pays 7% APR with daily (365-day) compounding. D. An account that pays 7% APR with monthly compounding. E. An account that pays 8% APR with daily (365-day) compounding

E. An account that pays 8% APR with daily (365-day) compounding

Which of the following statements is CORRECT?

Even if the pure expectations theory is correct, there might at times be an inverted Treasury yield curve.

A decline in a firm's inventory turnover ratio suggests that it is improving both its inventory management and its liquidity position, i.e., that it is becoming more liquid.

False

A time line is not meaningful unless all cash flows occur annually.

False

A zero coupon bond is a bond that pays no interest and is offered (and initially sells) at par. These bonds provide compensation to investors in the form of capital appreciation

False

An individual stock's diversifiable risk, which is measured by its beta, can be lowered by adding more stocks to the portfolio in which the stock is held

False

Even though Firm A's current ratio exceeds that of Firm B, Firm B's quick ratio might exceed that of A. However, if A's quick ratio exceeds B's, then we can be certain that A's current ratio is also larger than B's.

False

Portfolio A has but one stock, while Portfolio B consists of all stocks that trade in the market, each held in proportion to its market value. Because of its diversification, Portfolio B will by definition be riskless

False

Private markets are those like the NYSE, where transactions are handled by members of the organization, while public markets are those like the Nasdaq, where anyone can make transactions.

False

Since the ROA measures the firm's effective utilization of assets without considering how these assets are financed, two firms with the same EBIT must have the same ROA.

False

The NYSE is defined as a "primary" market because it is one of the largest and most important stock markets in the world

False

The NYSE is defined as a "spot" market purely and simply because it has a physical location. The NASDAQ, on the other hand, is not a stop market because it has no one central location

False

The term IPO stands for "individual purchase order," as when an individual (as opposed to an institution) places an order to buy a stock.

False

Time lines cannot be constructed in situations where some of the cash flows occur annually but others occur quarterly.

False

Which of the following is a primary market transaction?

IBM issues 2,000,000 million shares of new stock and sells them to the public through an investment bankers

Which of the following statements is CORRECT?

If a loan has a nominal annual rate of 8%, then the effective rate will never be less than 8%.

Which of the following statements is CORRECT?

If two firms differ only in their use of debt—i.e., they have identical assets, identical total invested capital, sales, operating costs, interest rates on their debt, and tax rates—but one firm has a higher total debt to total capital ratio, the firm that uses more debt will have a lower profit margin on sales and a lower return on assets.

Which of the following actions would be most likely to reduce potential conflicts between stockholders and bondholders?

Including restrictive covenants in the company's bond indenture (which is the contract between the company and its bondholders).

Which of the following statements is CORRECT?

Interest paid to an individual is counted as income for federal tax purposes and taxed at the individual's regular tax rate, which in 2013 could go up to 39.6%, but qualified dividends received were taxed at a maximum tax rate of 15% for individuals earning less than $400,000 and married taxpayers filing jointly earning less than $450,000.

Which of the following statements is CORRECT?

It is usually easier to transfer ownership in a corporation than in a partnership.

Which of the following events would make it more likely that a company would call its outstanding callable bonds?

Market interest rates decline sharply

The Nantell Corporation just purchased an expensive piece of equipment. Assume that the firm planned to depreciate the equipment over 5 years on a straight-line basis, but Congress then passed a provision that requires the company to depreciate the equipment on a straight-line basis over 7 years. Other things held constant, which of the following will occur as a result of this Congressional action? Assume that the company uses the same depreciation method for tax and stockholder reporting purposes.

Nantell's operating income (EBIT) will increase.

You recently sold 200 Shares of Disney stock, and the transfer was made through a broker. This is an example of a

Secondary market transaction

Money markets are markets for

Short-term debt securities such as Treasury bills and commercial paper.

Which of the following statements is CORRECT?

Since bondholders receive fixed payments, they do not share in the gains if risky projects turn out to be highly successful. However, they do share in the losses if risky projects fail and drive the firm into bankruptcy. Therefore, bondholders generally prefer to see corporate managers invest in low risk/low return projects rather than high risk/high return projects.

Which of the following statements is CORRECT?

The "apparent," but not necessarily the "true," financial position of a company whose sales are seasonal can change dramatically during a given year, depending on the time of year when the financial statements are constructed.

Analysts who follow Howe Industries recently noted that, relative to the previous year, the company's net cash provided from operations increased, yet cash as reported on the balance sheet decreased. Which of the following factors could explain this situation?

The company made large investments in fixed assets.

Austin Financial recently announced that its net income increased sharply from the previous year, yet its net cash provided from operations declined. Which of the following could explain this performance?

The company's depreciation expense declined.

Which of the following would indicate an improvement in a company's financial position, holding other things constant?

The current and quick ratios both increase.

Which of the following statements regarding a 15-year (180-month) $125,000, fixed-rate mortgage is CORRECT? (Ignore taxes and transactions costs.)

The outstanding balance declines at a faster rate in the later years of the loan's life.

Your bank account pays a 6% nominal rate of interest. The interest is compounded quarterly. Which of the following statements is CORRECT?

The periodic rate of interest is 1.5% and the effective rate of interest is greater than 6%.

Your bank account pays an 8% nominal rate of interest. The interest is compounded quarterly. Which of the following statements is correct?

The periodic rate of interest is 2% and the effective rate of interest is greater than 8%

You are considering two equally risky annuities, each of which pays $5,000 per year for 10 years. Investment ORD is an ordinary (or deferred) annuity, while Investment DUE is an annuity due. Which of the following statements is CORRECT?

The present value of DUE exceeds the present value of ORD, and the future value of DUE also exceeds the future value of ORD.

Which of the following statements is CORRECT?

The primary reason the annual report is important in finance is that it is used by investors when they form expectations about the firm's future earnings and dividends, and the riskiness of those cash flows.

Which of the following statements is CORRECT?

The statement of cash flows shows how much the firm's cash--the total of currency, bank deposits, and short-term liquid securities (or cash equivalents)-- increased or decreased during a given year.

Which of the following statements is CORRECT?

The threat of takeovers tends to reduce potential conflicts between stockholders and managers.

Safeco's current assets total to $20 million versus $10 million of current liabilities, while Risco's current assets are $10 million versus $20 million of current liabilities. Both firms would like to "window dress" their end-of-year financial statements, and to do so they tentatively plan to borrow $10 million on a short-term basis and to then hold the borrowed funds in their cash accounts. Which of the statements below best describes the results of these transactions?

The transactions would lower Safeco's financial strength as measured by its current ratio but raise Risco's current ratio.

A hostile takeover is said to occur when another corporation or group of investors gains voting control over a firm and replaces the old managers. If the old managers were managing the firm inefficiently, then hostile takeovers can improve the economy. However, hostile takeovers are controversial, and legislative actions have been taken to make them more difficult to undertake.

True

A time line is meaningful even if all cash flows do not occur annually.

True

An increase in accounts payable represents an increase in net cash provided by operating activities just like borrowing money from a bank. An increase in accounts payable has an effect similar to taking out a new bank loan. However, these two items show up in different sections of the statement of cash flows to reflect the difference between operating and financing activities.

True

From an investors perspective, a firm's preferred stock is generally considered to be less risky than its common stock but more risky than bonds. However, from a corporate issuer's standpoint, these risk relationships are reversed: bonds are the most risky for the firm, preferred is next, and common is least risky

True

In a "Dutch auction" for new stock, individual investors place bids for shares directly. Each potential bidder indicates the price he or she is willing to pay and how many shares he or she will purchase at that price. The highest price that permits the company to sell all the shares it wants to sell is determined, and this is the "market clearing price." All bidders who specified this price or higher are allowed to purchase their shares at the market clearing price.

True

It is generally harder to transfer one's ownership interest in a partnership than a corporation

True

Other things held constant, the more debt a firm uses, the lower its return on total assets will be.

True

Partnerships and proprietorships generally have a tax advantage over corporations

True

Profitability ratios show the combined effects of liquidity, asset management, and debt management on a firm's operating results.

True

The Y-axis intercept of the SML represents the required return of a portfolio with a beta of zero, which is the risk-free rate

True

The times-interest-earned ratio measures the extent to which operating income can decline before the firm is unable to meet its annual interest costs.

True

To estimate the cash flow from operations, depreciation must be added back to net income because it is a non-cash charge that has been deducted from revenue in the net income calculation.

True

The primary operating goal of a publicly-owned firm trying to best serve its stockholders should be to

Use a well-structured managerial compensation package to reduce conflicts that may exist between stockholders and managers.