50.Today, you want to sell a zero coupon bond you currently own. The bond matures in 9 years. How much will you receive for your bond if the market yield to maturity is currently 8.88%? Ignore any accrued interest.

A.$468.10

B.$496.93

C.$676.39

D.$465.02

46.A project has an initial investment of $95,000. Its four year cash inflows are estimated to be $21,000 in year 1, $23,000 in year 2, $25,000 in year 3, and $27,000 in year 4. If the rate of return is 8%, calculate the project's Profitability Index.

A.1.83

B.1.53

C.0.83

D.0.53

40.Which of the following is considered a carrying cost associated with granting credit?

A.A firm's required return on payables.

B.A firm's cost of managing credit.

C.A firm's cost of managing payments to suppliers.

D.A firm's cost of equity.

39.Which of the following is the best definition of an aging schedule.

A.Wholly owned subsidiary that handles credit extension and receivables financing through commercial paper.

B.A discount given for a cash purchase.

C.Procedures followed by a firm in collecting accounts receivable.

D.A compilation of accounts receivable by the age of each account.

38.Which of the following is the best definition of a captive finance company.

A.Wholly owned subsidiary that handles credit extension and receivables financing through commercial paper.

B.A discount given for a cash purchase.

C.Procedures followed by a firm in collecting accounts receivable.

D.Conditions on which a firm sells its goods and services for cash or credit

33.ABC Co. is considering granting credit to a new corporate customer. ABC is concerned about the new customer's credit history. ABC would likely find each of the following useful EXCEPT ________________.

A.The customer's financial statements.

B.A Dun & Bradstreet report.

C.A Credited report.

D.An aging of ABC's receivables.

34.Which one of the following will increase the average balance in accounts receivable?

A.A decrease in the discount period.

B.Cash sales as an increased percentage of total sales.

C.An increase in the sales amount per customer.

D.A decrease in the trade discount.

35.Which of the following is the best definition of a collection policy.

A.A compilation of accounts receivable by the age of each account.

B.Wholly owned subsidiary that handles credit extension and receivables financing through commercial paper.

C.Procedures followed by a firm in collecting accounts receivable.

D.Conditions on which a firm sells its goods and services for cash or credit.

36.Which of the following is the best definition of a cash discount.

A.A compilation of accounts receivable by the age of each account.

B.A discount given for a cash purchase.

C.Procedures followed by a firm in collecting accounts receivable.

D.Conditions on which a firm sells its goods and services for cash or credit.

37.Which of the following is the best definition of a terms of sale.

A.A compilation of accounts receivable by the age of each account.

B.Wholly owned subsidiary that handles credit extension and receivables financing through commercial paper.

C.A discount given for a cash purchase.

D.Conditions on which a firm sells its goods and services for cash or credit.

28.Which one of the following statements is correct concerning zero-balance accounts?

A.Zero-balance accounts are no longer legal in Canada.

B.A master account must be used in conjunction with a zero-balance account.

C.Zero-balance accounts are used solely in conjunction with a lockbox system.

D.Zero-balance accounts are still required to maintain a minimal balance.

29.Chrysler Corp. held large sums of cash during the mid-1990s primarily because it would need a large amount of cash in the event of a recession. This is a (n) _____________ for holding cash.

A.Precautionary motive.

B.Adjustment motive.

C.Speculative motive.

D.Compensating balances motive.

30.Collection float:

A.Is the result of sending a cheque through the mail to one of your suppliers.

B.Increases the available balance before it increases the ledger balance.

C.Is equal to a firm's available balance minus the firm's book balance.

E.Can be reduced by slowing down the cheque processing time within a firm.

31.Money market instruments:

A.Sacrifice return for safety.

C.Are the most liquid when they are in the form of commercial paper.

D.Provide income which is tax-exempt.

E.Tend to be liquid but not marketable.

32.Which one of the following statements correctly describes a credit instrument?

A.All credit sales of a commercial nature are accompanied by a promissory note.

B.A time draft requires payment at the time the goods are delivered.

C.A commercial draft is signed once the goods are received in good shape by the buyer.

D.Under a conditional sales contract, the seller retains legal possession of the good sold until the sales invoice has been paid in full.

24.Which of the following is the best definition of target cash balance?

A.The costs associated with holding too little cash.

B.An automated teller machine card used at the point of purchase to avoid the use of cash. As this is not a credit card, money must be available in the user's bank account.

C.A chequing account in which a zero balance is maintained by transfers of funds from a master account in an amount only large enough to cover cheques presented.

D.A firm's desired cash level as determined by the trade-off between carrying costs and shortage costs.

25.Which of the following is the best definition of transaction motive?

A.The costs associated with holding too little cash.

B.An automated teller machine card used at the point of purchase to avoid the use of cash. As this is not a credit card, money must be available in the user's bank account.

C.The need to hold cash to satisfy normal disbursement and collection activities associated with a firm's ongoing operations.

D.A firm's desired cash level as determined by the trade-off between carrying costs and shortage costs.

26.Which of the following is true regarding cash management?

A.A cost of holding cash is the liquidity it gives the firm.

B.A cost of holding cash is the interest income earned on the outstanding cash balance.

C.A firm should decrease its cash holdings as long as the NPV of doing so is negative.

D.The basic objective in cash management is to keep the investment in cash as low as possible while still operating efficiently and effectively.

27.Which one of the following statements is correct?

A.Cash concentration accounts should improve the efficiency of a firm's cash management.

B.A firm with a lock-box system does not need a concentration account.

C.Firms generally need multiple concentration accounts.

D.Concentration accounts are not needed when a firm's disbursements are all done electronically.