0 points

QUESTION 20

1.Here is Simple Bank's balance sheet (with associated interest rates):

Assets

$800 million Business Loans, 7.5%

$200 million Corporate Bonds, 4.25%

$25 million Reserves, Fed pays 0.5%

$10 million Real Assets

Liabilities

$550 million Demand Deposits

$360 million Time Deposits, 2.5%

$25 million Preferred Shares,3.3%

$100 million Common Shares

Q.If capital requirements are 8% for loans and 6% for bonds, calculate the bank's capital excess or deficiency.

Please fill in this box using the result of the previous question, these two questions are the same.

Note: Please round up your answer to two decimal places

(e.g., if your answer is 170.124 -> you need to write down 170.12 in the blank

if your answer is 170.127 -> you need to write down 170.13 in the blank)

4 points

QUESTION 21

1. If two securities promise the same cash flow at a specific future date, the one with the higher price must have _______ rate of discount:

a higher

a lower

the same

1 points

QUESTION 22

1.Consider $5MM to be paid in five years.If the risk premium investors assign to this cash flow increases, its present value:

increases

decreases

stays the same

1 points

QUESTION 23

1.Which of the following is true of (ordinary) preferred shares?

The larger a company's profit, the higher the dividend paid on preferred stock.

You should expect a higher return from a company's preferred than from its common shares.

Preferred shareholders have priority in payments from a company in bankruptcy relative to the company's bank and bond creditors.

None of these

1 points

QUESTION 24

1. A company begins with the following simple balance sheet: $10 million in real assets; $1 million cash; $5.5 million each in owners' equity and debt.Which of the following actions willdecreasea company's leverage ratio?Choose two

Use half of the cash from the balance sheet to purchase equipment

Borrow an additional $1 million and purchase equipment

Raise an additional $1 million in equity to purchase equipment

Raise an additional $1 million in equity to pay off debt

2 points

QUESTION 25

1. As a lender/depositor, how would you compare time to demand deposits?

Demand deposits are more liquid, but time deposits pay a higher interest rate

Demand deposits are more liquid, but time deposits pay a lower interest rate

Demand deposits are less liquid, but time deposits pay a higher interest rate

Demand deposits are less liquid, but time deposits pay a lower interest rate

1 points

QUESTION 26

1. Which of the following would be termed a secondary transaction?

General Electric Co issues shares

Boeing Company sells shares

Proctor & Gamble issues a bond

Cummins Engines borrows funds from a bank

A shareholder of Home Depot sells her shares to an investor who as yet owns no shares in the company

1 points

QUESTION 27

1. The more optimistic investors are about a company's future profits, the ________ the ratio of the company's market value to book value.

greater

lower

no effect on

1 points

QUESTION 28

1. Due to the resurgence of the coronova virus this autumn, Carl's Carpet Cleaning just received cancelation notices covering a third of its orders for the holiday season.Which of the following declinesnowfor Carl's?

book value

market value

leverage ratio

profits tax rate

balance sheet cash

1 points

QUESTION 29

1. You just won a state lottery!The lottery offers you a choice: you may choose a lump sum today, or $89 million in 26 equal annual installments at the end of each year.Assume the funds can be invested (yield) at an annual rate of 7.65%.Whatis the lump sumthat wouldequal the present value of the annualinstallments? :

$89,000,000

$38,163,612

$41,083,128

$13,092,576