1. Chad Watering, Inc. had the following operating results for 2012: sales = $5,200; cost of goods sold = $4,500; depreciation expense = $500; interest expense = $150; dividends paid = $110. At the beginning of the year, net fixed assets were $3,900, current assets were $1,000, and current liabilities were $750. At the end of the year, net fixed assets were $4,100, current assets were $1,550, and current liabilities were $900. The tax rate for 2012 was 34 percent. What is the cash flow from assets for 2012?

	-417
	-590
	-122
	-320
	-44

1. Which statement is TRUE?

	PV of growing perpetuity cannot be calculated since the relevant cash flows grow forever.
	PV of annuity due is always smaller than PV of ordinary annuity (assuming interest rate is greater than 0).
	Most loans are a form of perpetuity.
	FV of annuity due is larger than FV of ordinary annuity (assuming interest rate is greater than 0).
	A perpetuity composed of $100 monthly payments is worth less than an annuity of $100 monthly payments given equal discount rates

1. Kaiser Industries has bonds on the market making annual payments, with 14 years to maturity, a par value of $1,000, and selling for $1525. At this price, the bond yields 8%. What is the coupon rate?

USE AT LEAST 4 DECIMAL PLACES

	14.37%
	19.88%
	13.58%
	12.75%
	15.35%

1. You are scheduled to receive $400,000 in one year from now. When you receive it, you will invest it for 5 more years at 6% APR with annual compounding. How much money will you have 6 years from now?

	676,209
	635,290
	576,209
	535,290
	435,290

I said 535,290

1. Which of the following statement is FALSE?

	As the length of the compounding period increases, small differences in discount rates can lead to large differences in future value.
	Interest earned on both the initial principal and the interest reinvested from prior periods is called compound interest.
	As interest rate increases, present value needed for fixed future investment goal decreases.
	None of the choices.
	Interest rate and future value have an inverse relationship , when everything else is fixed.

1 points

1. You just settled an insurance claim. The settlement calls for increasing payments over a seven-year period. The first payment will be paid one year from now in the amount of $8,000. the following payments will increase by 5% annually. What is the value of this settlement to you today if you can earn 7% on your investments?

USE AT LEAST 6 DECIMAL PLACES

	45,785.85
	49,491.43
	31,063.79
	36,408.28
	57,811.54

1. You are paying an effective annual rate of 16.55% on your credit card. The interest is compounded daily. What is the annual percentage rate on this account?

USE AT LEAST 6 DECIMAL PLACES

	16.32%
	15.32%
	16.75%
	17.32%
	15.75%

1. Which of the following statement is FALSE?

	Primary goal of financial managers is to maximize the current dividends per share of the existing stock.
	Capital budgeting is related with managing firm's fixed assets.
	Shareholders have the ultimate control of a corporation.
	Determining whether to pay cash for a purchase or use the credit offered by the supplier is relevant to working capital management decisions.
	Agency problem is relevant to conflict of interest between the corporate shareholders and the corporate managers.

1. According to the Rule of 72, how long would it take for $1,000 to become $8,000?

	36 years at 6% interest
	24 years at 12% interest
	20 years at 14.4% interest
	50 years at 7.2% interest
	20 years at 7.2% interest

Choose the first one

1. You just won the magazine sweepstakes and opted to take unending payments. The first payment will be $35,000 and will be paid one year from today. Every year thereafter, the payments will increase by 2% annually. What is the present value of your prize at a discount rate of 6%?

	556,000
	455,000
	350,000
	775,000
	875,000

Choose they last one

1. On June 1, you borrowed $195,000 to buy a house. The mortgage rate is 2.5%. The loan is to be repaid in equal monthly payments over 15 years. All taxes and insurance premiums are to be paid separately. What would be your monthly payment? And how much of the first payment applies to the principal balance?

	monthly payment = approx. $1300 first payment towards principal balance = approx. $566
	monthly payment = approx. $1450 first payment towards principal balance = approx. $566
	monthly payment = approx. $1450 first payment towards principal balance = $355
	monthly payment = approx. $1850 first payment towards principal balance = approx. $894
	monthly payment = approx. $1300 first payment towards principal balance = approx. $894

1. Bonner Metals wants to issue a new 20-year bonds for some much needed expansion projects. The company currently has 9% bonds on the market that sell for $970, make semi-annual payments, and mature in 15 years. What should the coupon rate be on the new bonds if the firm wants to sell them at par?

	9.85%
	9.38%
	8.75%
	8.44%
	9.56%

1. Chad Watering, Inc. had the following operating results for 2012: sales = $5,200; cost of goods sold = $4,500; depreciation expense = $500; interest expense = $150; dividends paid = $110. At the beginning of the year, net fixed assets were $3,900, current assets were $1,000, and current liabilities were $750. At the end of the year, net fixed assets were $4,100, current assets were $1,550, and current liabilities were $900. The tax rate for 2012 was 34 percent. What is the cash flow from assets for 2012?

	-417
	-590
	-122
	-320
	-44

1. Which statement is TRUE?

	PV of growing perpetuity cannot be calculated since the relevant cash flows grow forever.
	PV of annuity due is always smaller than PV of ordinary annuity (assuming interest rate is greater than 0).
	Most loans are a form of perpetuity.
	FV of annuity due is larger than FV of ordinary annuity (assuming interest rate is greater than 0).
	A perpetuity composed of $100 monthly payments is worth less than an annuity of $100 monthly payments given equal discount rates

1. Kaiser Industries has bonds on the market making annual payments, with 14 years to maturity, a par value of $1,000, and selling for $1525. At this price, the bond yields 8%. What is the coupon rate?

USE AT LEAST 4 DECIMAL PLACES

	14.37%
	19.88%
	13.58%
	12.75%
	15.35%

1. You are scheduled to receive $400,000 in one year from now. When you receive it, you will invest it for 5 more years at 6% APR with annual compounding. How much money will you have 6 years from now?

	676,209
	635,290
	576,209
	535,290
	435,290

I said 535,290

1. Which of the following statement is FALSE?

	As the length of the compounding period increases, small differences in discount rates can lead to large differences in future value.
	Interest earned on both the initial principal and the interest reinvested from prior periods is called compound interest.
	As interest rate increases, present value needed for fixed future investment goal decreases.
	None of the choices.
	Interest rate and future value have an inverse relationship , when everything else is fixed.

1 points

1. You just settled an insurance claim. The settlement calls for increasing payments over a seven-year period. The first payment will be paid one year from now in the amount of $8,000. the following payments will increase by 5% annually. What is the value of this settlement to you today if you can earn 7% on your investments?

USE AT LEAST 6 DECIMAL PLACES

	45,785.85
	49,491.43
	31,063.79
	36,408.28
	57,811.54

1. You are paying an effective annual rate of 16.55% on your credit card. The interest is compounded daily. What is the annual percentage rate on this account?

USE AT LEAST 6 DECIMAL PLACES

	16.32%
	15.32%
	16.75%
	17.32%
	15.75%

1. Which of the following statement is FALSE?

	Primary goal of financial managers is to maximize the current dividends per share of the existing stock.
	Capital budgeting is related with managing firm's fixed assets.
	Shareholders have the ultimate control of a corporation.
	Determining whether to pay cash for a purchase or use the credit offered by the supplier is relevant to working capital management decisions.
	Agency problem is relevant to conflict of interest between the corporate shareholders and the corporate managers.

1. According to the Rule of 72, how long would it take for $1,000 to become $8,000?

	36 years at 6% interest
	24 years at 12% interest
	20 years at 14.4% interest
	50 years at 7.2% interest
	20 years at 7.2% interest

Choose the first one

1. You just won the magazine sweepstakes and opted to take unending payments. The first payment will be $35,000 and will be paid one year from today. Every year thereafter, the payments will increase by 2% annually. What is the present value of your prize at a discount rate of 6%?

	556,000
	455,000
	350,000
	775,000
	875,000

Choose they last one

1. On June 1, you borrowed $195,000 to buy a house. The mortgage rate is 2.5%. The loan is to be repaid in equal monthly payments over 15 years. All taxes and insurance premiums are to be paid separately. What would be your monthly payment? And how much of the first payment applies to the principal balance?

	monthly payment = approx. $1300 first payment towards principal balance = approx. $566
	monthly payment = approx. $1450 first payment towards principal balance = approx. $566
	monthly payment = approx. $1450 first payment towards principal balance = $355
	monthly payment = approx. $1850 first payment towards principal balance = approx. $894
	monthly payment = approx. $1300 first payment towards principal balance = approx. $894

1. Bonner Metals wants to issue a new 20-year bonds for some much needed expansion projects. The company currently has 9% bonds on the market that sell for $970, make semi-annual payments, and mature in 15 years. What should the coupon rate be on the new bonds if the firm wants to sell them at par?

	9.85%
	9.38%
	8.75%
	8.44%
	9.56%