Question
9. Suppose you have $850 and plan to purchase a 5-year certificate of deposit (CD) that pays 3.5% interest, compounded annually. How much will you
9. Suppose you have $850 and plan to purchase a 5-year certificate of deposit (CD) that pays 3.5% interest, compounded annually. How much will you have when the CD matures?
a. $837.91
b. $1,009.53
c. $888.39
d. $858.10
e. $777.34
10. 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?
a. $613.91
b. $564.80
c. $736.70
d. $466.57
e. $724.42
11. Ten years ago, Lucas Inc. earned $0.50 per share. Its earnings this year were $5.00. What was the growth rate in earnings per share (EPS) over the 10-year period?
a. 19.42%
b. 21.75% c. 25.89% d. 32.11% e. 29.78%
12. One of the four most fundamental factors that affect the cost of money as discussed in the text is the risk inherent in a given security. The higher the risk, the higher the security's required return, other things held constant.
a. True b. False
13. Which of the following statements is CORRECT, other things held constant? a. If companies have fewer good investment opportunities, interest rates are likely to increase.
b. If individuals increase their savings rate, interest rates are likely to increase. c. If expected inflation increases, interest rates are likely to increase.
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