Multiple choice questions attached in file. Fifty in total.

QUESTION 1 If Sam lends his cousin, Tony, $100 for 9 years at 7% interest compounded annually, how much will his cousin owe him at the end of 8 years? $158.20 $125.90 $157.13 $171.82 QUESTION 2 1 points Aldis received $7,200 from his grandmother as his eighth grade graduation gift. The money is invested at 8% compounded annually and Aldis plans on leaving the money there for 4 years until he is ready to begin college. How much money will Aldis have when he begins college? $9,796 $9,972 $7,992 $7,929 QUESTION 3 1 points When the financial planning problem involves seeking a future value, the periods are referred to as: compounding periods multiple periods discounting periods exponential periods 1 points QUESTION 4 Timea's RRSP, which currently earns 7%, will be worth $241,000 by her retirement in 10 years time. To the nearest $100, how much does she have in her RRSP today? $124,000. $131,000. $122,500. $120,500. QUESTION 5 1 points All of the following factors must be known in order to calculate the future value of a single sum, EXCEPT: the interest rate to be earned the present value of the sum the amount to be deposited each year the number of years the sum will be left on deposit QUESTION 6 1 points As a birthday gift, Augustino's godfather invested $5,000 in an account earning 8.75% interest. If the account balance is currently $9,781, for how long has Augustino had the account? 7.8 years 8.0 years 8.2 years 7.9 years 1 points QUESTION 7 Zena wants to buy a sound system that costs $2,322. She plans to finance the purchase by investing $1,800 in an account earning 8.5% annual interest. If she does this, approximately how many years will it take for her account to be worth $2,322? 2.98 years 3.12 years 3.00 years 2.93 years 1 points QUESTION 8 Miguel de la Vega wants to give his son $25,000 upon completion of his college education. If he invests $10,000 now in an account earning 6.375% annual interest, approximately how many years will it take for him to achieve his goal? 14.37 years 15.71 years 15.02 years 14.83 years 1 points QUESTION 9 All of the following are examples of ordinary annuities, EXCEPT: mortgage note payments quarterly dividends semiannual interest payments insurance policy premiums QUESTION 10 1 points What would it cost Charlotte to purchase an ordinary annuity of $200 per year for the next 4 years, if the interest rate is 7% annually? $652.58 $677.44 $687.98 $662.16 QUESTION 11 1 points Sven Gali's father had given him a choice; he may receive either $2,000 at the end of each year for the next 5 years, or one lump sum today. If Sven's annual opportunity cost is 9%, what lump sum would be equivalent to the five payments? $8,177 $7,977 $8,479 $7,779 QUESTION 12 All of the following are characteristics of an annuity due, EXCEPT: the present value of an annuity due is always less than the present value of an ordinary annuity the compounding process begins as soon as the dollar is received it is more 1 points advantageous to receive a dollar at the beginning of the period annuity due payments always fall at the beginning of the period QUESTION 13 1 points Edna and Seemor plan to invest $4,000 at the end of each year in an RRSP earning 11.875% annual interest. What will be the value of the account in 12 years? $95,802 $107,178 $93,116 $97,204 1 points QUESTION 14 All of the following statements about the characteristics of the future value of an ordinary annuity are true, EXCEPT: for a given number of compounding periods, if the interest rate increases, the future value increases future value increases as the interest rate increases for any given interest rate, as the number of periods increases, the future value of the ordinary annuity increases there is one period of compounding on the last payment 1 points QUESTION 15 Chad borrows $10,000 for a 5-year term to finance a new boat. He is paying a nominal annual interest rate of 13.25% compounded monthly. What is his monthly payment? $228.81. $237.24. $246.11. $219.22. QUESTION 16 1 points Kim and Cheryl retire this year and currently have $500,000 in savings. They plan to receive an annual payment at the beginning of each year for the next 20 years. If their savings earn 10.75% , what payment should they count on? $51,209 $49,769 $53,204 $55,769 QUESTION 17 1 points Greg and Alice Thibodeau plan to retire in 17 years. They estimate that they will need $300,000 in personal savings at the time they retire, in addition to their company pension plans. If their investments earn 11.5% annually, what amount of money should the Thibodeaus invest at the end of each of the next 17 years to achieve their goal? $6,238 $6,622 $6,433 $6,809 1 points QUESTION 18 If Tia wants to save $10,000 over the next 5 years, in order to go back to school and she can get an annual interest of 11.75% compounded monthly on her savings, how much should she save at the end of each month? $123.27 $143.27 $133.27 $113.37 QUESTION 19 1 points Kristia Ouderkirk wishes to save $25,000 to purchase a cottage in 6 years. She plans to deposit a sum of money at the beginning of each year in an account earning 8.375% annual interest to achieve her goal. How much must she deposit each year? $4,102 $4,273 $3,911 $3,115 QUESTION 20 1 points All of the following variables are required to determine an interest rate for an annuity due, EXCEPT: the payment amount the present or future value the payment term the number of compounding periods QUESTION 21 1 points Stefan worked for Greenbank Financial Services for five years. He left his vested pension benefits in the Greenbank plan when he changed employers. When he retired from his present employer at age 65, Greenbank gave him a choice between taking the vested pension benefits in the form of a lifetime annuity of $15,000 per year paid at the end of the year or a lump sum. Stefan wants to compare the value of the annuity to the lump sum. Assuming Stefan lives for 15 years and the rate of interest is 7%, what is the value of the annuity? $16,050 $136,619 $146,182 $240,750 QUESTION 22 1 points Montel purchased a 90-day, $5,000 T-bill for $4,968.50. Lila offered to purchase Montel's T-bill after he had held it for 30 days. At the time, the prevailing interest rate was 4%. Which of the following statements are TRUE? 1. 2. 3. 4. The yield on Montel's T-bill is 2.6% Lila is willing to pay $4,967.87 for the T-bill. The effective annual return on Montel's T-bill is 3.91%. Lila is willing to pay $4,951.88 for the T-bill. 3 and 4 1 and 2 1 and 4 2 and 3 1 points QUESTION 23 Isabel prefers to purchase bonds that contain a sinking fund provision to protect her from any potential loss of her invested capital. She purchased a 20-year, $20,000 sinking fund bond with a 12% coupon, paid semi-annually, for $18,900. If the company calls the bond after 10 years, and the call penalty requires a payment of $30 per $1,000 of face value, what are the nominal and effective yields to call on this bond? 13.01% and 13.43%, respectively 13.16% and 13.59%, respectively 12.81% and 13.22%, respectively 12.77% and 13.18%, respectively QUESTION 24 1 points Burns Holdings Inc. recorded sales of $100,000 last year and distributed $40,000 in total dividend payments to the company's shareholders. The company also recorded cost of goods sold of $70,000, total other expenses of $10,000, equity income of $5,000 and an increase in its cash account of $50,000. If the company paid income taxes of $15,000, what is the company's net after-tax income for the year? $60,000 $25,000 $10,000 ($30,000) QUESTION 25 1 points Rocco has an 8% semi-annual, $20,000 put bond with a remaining term to maturity of 18 years. The put bond includes an option for the bondholder to redeem the bond at par at the end of 3 years from now. Interest rates are currently 10%. The value of the bond is: $19,005.26 $22,220.07 $20,000.00 $18,984.86 QUESTION 26 1 points Marco is an active investor who often invests in tax shelters to defer income tax on his business income. To compare the after-tax rate of return on alternative investments, Marco uses the net present value (NPV) and internal rate of return (IRR) methods. Investment A has a NPV of $0 and an IRR of 8%. Investment B has an NPV of $10,000 and an IRR of 12%. Investment C has an NPV of minus $2,000 and an IRR of 6%. If Marco's minimum acceptable return is 8%, which investment should he considered? Investment A only Investment B or C Investment A or B Investment B only QUESTION 27 1 points Donna is reviewing the financial reports for four different companies for the purpose of calculating a variety of financial ratios. Which of the following statements about financial ratios are TRUE?1. Company A and Company B have current ratios of 1.87. Company A has a quick ratio of 1.45 and Company B has a quick ratio of 1.67. Therefore, Company B has a greater capacity to repay its debts as they come due.2. Company C had a gross profit margin of 18.56% in 1997. By 2001 the gross profit margin had decreased to 12.98%. This decline in the gross profit margin is directly related to the cost of raw materials. 3. Company D wants to calculate its P/E ratio for its preferred shares. To do so, it divides the current market price of their common shares by the earnings per share during the previous year.4. Company E's earnings per common share was $6.17 in 1997 with a market value of $15.00. By 2001, the earnings per common share had risen to $13.53 with a market value of $24.00. Company E's P/E ratio has declined. 2 1 2 1 and and and and 3 4 4 3 1 points QUESTION 28 Rory is performing an analysis of two similar companies. Company A and Company B, which both have current ratios of 3:1. However, Company B's quick ratio is 1.85, whereas Company A's quick ratio is 2.25. Company A also has a lower debt-to-equity ratio than Company B. Which company will be in a better position to repay its debts as they come due? Company A, due to its higher quick ratio Company B, due to its lower quick ratio They are both equally capable of repaying their debts since they have identical current ratios Company B, due to its higher debt-to-equity ratio 1 points QUESTION 29 Gerald is in the process of completing a company analysis of Catch Inc. He is trying to determine the company's ability to meet its current obligations. At this point in the business cycle, sales are slow and the inventory is piling up in its warehouse. Which of the following ratios represents the measure of Catch's immediate liquidity? The acid test ratio The dividend yield The net profit margin The interest coverage ratio QUESTION 30 1 points Global Financial currently has 8 million common shares outstanding. Over the last three years, the company experienced a substantial sell-off of shares as the earnings per common share fell and the market value of the stock plummeted. Net profit last year amounted to $105 million, down for the second straight year. The company also paid $47 million in preferred dividends and had $650 million in common equity. What is Global's earnings per common share? $3.09 $1.71 $7.25 $13.65 1 points QUESTION 31 Ernie owns 300 shares of Company X. When he purchased the shares in 1994, they were valued at $4.50 per share. Last year, Ernie received a dividend of $0.78 per share when the shares were priced at $6.04. What was the dividend yield on these shares last year? 17.33% 50.65% 12.91% 74.50% 1 points QUESTION 32 Donna is reviewing the most recent financial reports for four different companies for the purpose of calculating a variety of financial ratios. Which of the following statements about financial ratios is TRUE? Four years ago, Company E's earnings per common share was $6.17 with a market value of $15.00. This year, the earnings per common share had risen to $13.53 with a market value of $24.00. Company E's P/E ratio has declined Four years ago, Company C had a gross profit margin of 18.56%. This year, the gross profit margin had decreased to 12.98%. This decline in the gross profit margin is directly related to the cost of raw materials Company A and Company B have current ratios of 1.87. Company A has a quick ratio of 1.45 and Company B has a quick ratio of 1.67. Therefore, Company A has a greater capacity to repay its debts as they come due Company D wants to calculate its P/E ratio for its preferred shares. To do so, it divides the current market price of their common shares by the earnings per share during the previous year 1 points QUESTION 33 A series of consecutive end of period payments or receipts of equal amount is called a(n) Future value Annuity Present value Annuity due 1 points QUESTION 34 Harry's assets total $ 337,000 while his liabilities are $ 85,000. With regard to Harry's net worth, which of the following statements is correct? $ 337,000 There is not sufficient information to calculate Harry's net worth $ 252,000 $ 422,000 QUESTION 35 1 points Megaframe Computer Company Balance Sheet As of December 31, 2010 Assets and Liabilities Cash Accounts Receivabl e Inventory Fixed Asset Total Assets 40,000 Accounts Payable Accrued 60,000 Expense s 90,000 Long Term Debt 220,000 Common Stock Retained Earnings 410,000 Total Liab & Equity Income Statemen t For the year ended Decembe r 31, 2010 Sales 720,000 Cost of Goods sold 500,000 Gross Profit 220,000 Sales and Administr ative expense 20,000 Amortization 40,000 Operating Profit Interest Expense Profit before taxes Taxes (30%) Net Income 160,000 16,000 144,000 43,200 100,800 60,000 40,000 130,000 80,000 100,000 410,000 Times interest earned for Magaframe Computer is: 11 x 9x 4.5 x 12.5 x 1 points QUESTION 36 Megaframe Computer Company Balance Sheet As of December 31, 2010 Assets and Liabilities Cash Accounts Receivabl e Inventory Fixed Asset Total Assets 40,000 Accounts Payable Accrued 60,000 Expense s 90,000 Long Term Debt 220,000 Common Stock Retained Earnings 410,000 Total Liab & Equity Income Statemen t For the year ended Decembe r 31, 2010 Sales 720,000 Cost of Goods sold 500,000 Gross Profit 220,000 Sales and 20,000 60,000 40,000 130,000 80,000 100,000 410,000 Administr ative expense Amortization Operating Profit Interest Expense Profit before taxes Taxes (30%) Net Income 40,000 160,000 16,000 144,000 43,200 100,800 Megaframe's current ratio is: 1.625:1 1.5:1 3.2:1 1.9:1 1 points QUESTION 37 Megaframe Computer Company Balance Sheet As of December 31, 2010 Assets and Liabilities Cash Accounts Receivabl e Inventory Fixed Asset Total Assets 40,000 Accounts Payable Accrued 60,000 Expense s 90,000 Long Term Debt 220,000 Common Stock Retained Earnings 410,000 Total Liab & Equity 60,000 40,000 130,000 80,000 100,000 410,000 Income Statemen t For the year ended Decembe r 31, 2010 Sales 720,000 Cost of Goods sold 500,000 Gross Profit 220,000 Sales and Administr ative expense 20,000 Amortization 40,000 Operating Profit Interest Expense Profit before taxes Taxes (30%) Net Income 160,000 16,000 144,000 43,200 100,800 Megaframe's quick ratio is: 1.6:1 1:1 10:1 2:1 QUESTION 38 1 points Megaframe Computer Company Balance Sheet As of December 31, 2010 Assets and Liabilities Cash Accounts Receivabl e Inventory Fixed Asset Total Assets 40,000 Accounts Payable Accrued 60,000 Expense s 90,000 Long Term Debt 220,000 Common Stock Retained Earnings 410,000 Total Liab & Equity Income Statemen t For the year ended Decembe r 31, 2010 Sales 720,000 Cost of Goods sold 500,000 Gross Profit 220,000 Sales and Administr ative expense Amortization Operating Profit Interest Expense Profit before taxes Taxes (30%) 20,000 40,000 160,000 16,000 144,000 43,200 60,000 40,000 130,000 80,000 100,000 410,000 Net Income 100,800 The firm's debt to asset ratio is: 56.1 % 47.22 % 33.33 % none of the above 1 points QUESTION 39 Megaframe Computer Company Balance Sheet As of December 31, 2010 Assets and Liabilities Cash Accounts Receivabl e Inventory Fixed Asset Total Assets 40,000 Accounts Payable Accrued 60,000 Expense s 90,000 Long Term Debt 220,000 Common Stock Retained Earnings 410,000 Total Liab & Equity Income Statemen t For the year ended Decembe r 31, 2010 Sales 720,000 Cost of Goods sold Gross Profit 500,000 220,000 60,000 40,000 130,000 80,000 100,000 410,000 Sales and Administr ative expense Amortization Operating Profit Interest Expense Profit before taxes Taxes (30%) Net Income 20,000 40,000 160,000 16,000 144,000 43,200 100,800 What is Megaframe Computer's total asset turnover: 4.50 x 3.6 x 2x 1.76 x 1 points QUESTION 40 Megaframe Computer Company Balance Sheet As of December 31, 2010 Assets and Liabilities Cash Accounts Receivabl e Inventory Fixed Asset 40,000 Accounts Payable Accrued 60,000 Expense s 90,000 Long Term Debt 220,000 Common Stock Retained Earnings 60,000 40,000 130,000 80,000 100,000 Total Assets 410,000 Total Liab & Equity 410,000 Income Statemen t For the year ended Decembe r 31, 2010 Sales 720,000 Cost of Goods sold 500,000 Gross Profit 220,000 Sales and Administr ative expense Amortization Operating Profit Interest Expense Profit before taxes Taxes (30%) Net Income 20,000 40,000 160,000 16,000 144,000 43,200 100,800 Compute Megaframe's after tax profit margin 20.0 % 15.4 % 10 % 14.0 % 1 points QUESTION 41 Megaframe Computer Company Balance Sheet As of December 31, 2010 Assets and Liabilities Cash Accounts Receivabl e Inventory Fixed Asset Total Assets 40,000 Accounts Payable Accrued 60,000 Expense s 90,000 Long Term Debt 220,000 Common Stock Retained Earnings 410,000 Total Liab & Equity Income Statemen t For the year ended Decembe r 31, 2010 Sales 720,000 Cost of Goods sold 500,000 Gross Profit 220,000 Sales and Administr ative expense Amortization Operating Profit Interest Expense Profit before taxes 20,000 40,000 160,000 16,000 144,000 60,000 40,000 130,000 80,000 100,000 410,000 Taxes (30%) Net Income 43,200 100,800 The firm's return on equity is 55.6 % 52.8 % 100.0 % 56.0 % 1 points QUESTION 42 A retirement plan guarantees to pay to you or your estate a fixed amount for 20 years. At the time of retirement you will have $ 73,425 to your credit in the plan. The plan anticipates earning 9 % interest. How much will your annual benefits be? $ 8,043 $ 3,965 $ 3,671 $ 13,216 1 points QUESTION 43 After 20 years, 100 shares of stock originally purchased for $ 1,000 was sold for $ 5,000. What was the yield on the investment? Choose the closest answer. 19.00 % 12.70 % 5.00 % 8.38 % QUESTION 44 1 points Ambrin Corp expects to receive $ 2,000 per year for 10 years and $ 3,500 per year for the next 10 years. What is the present value of this 20 year cash flow. Use a 11 % discount rate. $ 19,033 $ 27,870 $ 32,389 none of the above 1 points QUESTION 45 In determining the compound sum of a single amount, one measures The present value of an amount discounted at a given interest rate The present value of periodic payments at a given interest rate The future vale of periodic payments at a given interest rate The future value of an amount allowed to grow at a given interest rate QUESTION 46 1 points Mr. Nailor invests $ 5,000 in a certificate of deposit at his local bank. He receives annual interest of 8 % for 7 years. How much interest will his investment earn during this time period? $ 2,915 $ 6,254 $ 3,570 $ 8,570 1 points QUESTION 47 Dr. Jay wants to buy an IBM personal computer which will cost $ 2,788 four years from today. He would like to set aside an equal amount at the end of each year in order to accumulate the amount needed. He can earn 7 % annual return. How much should he set aside. $ 823.15 $ 627.94 $ 531.81 $ 697.00 QUESTION 48 1 points Babe Ruth Jr. has agreed to play for the Toronto Blue Jays for $ 9 million per year for the next 10 years. What calculation would be used to determine the value of this contract in today's dollars? Present value of an annuity Present value of a single amount Future value of an annuity None of the above QUESTION 49 1 points Mike Carlson will receive $ 10,000 a year from the end of the third year to the end of the 12th year (10 payments). The discount rate is 10 %. The present value today of this deferred annuity is: $ 61,446 $ 55,860 $ 50,782 $ 46,165 1 points QUESTION 50 You will deposit $ 2,000 today. It will grow for 6 years at 10 % interest compounded semiannually. You will then withdraw the funds annually over the next 4 years. The annual interest rate is 8 %. Your annual withdraw will be $ 4,332 $ 1,084 $ 2,340 $ 797