Question 1 (1 point)

You have deposited $5,000 in an account that pays 5% interest each year. How much will you have in the account at the end of six years? Round your answer to the nearest dollar

Question 1 options:

$6,500

$6,700

$6,381

none of the above

Question 2 (1 point)

A certain project will cost a firm $5,000 today.The project is not expected to produce any cash flows until the second year, at which point it is expected to produce $6,200.No other cash flows are anticipated.If the appropriate cost of capital is 15%, what is this project's NPV?Round your answer to the nearest dollar.

Question 2 options:

-$312

+$391

+$5,836

-$1,852

Question 3 (1 point)

A certain project will cost $50,000 and is expected to produce cash flows of $15,563 for the next seven years.The appropriate cost of capital is 15%.Calculate the project's NPV, rounding your answer to the nearest dollar.

Question 3 options:

-$36,467

+$58,941

+$14,748

+$64,748

Question 4 (1 point)

How much must you deposit in a bank account today to have $1,000 at the end of 5 years if the bank quotes a rate of 5%, compounded daily?Assume a 365-day year and round your answer to the nearest dollar

Question 4 options:

$784

$951

$884

$779

Question 5 (1 point)

You have deposited $5,000 in an account that pays 5% interest each year.How much will you have in the account at the end of six years?Round your answer to the nearest dollar.

Question 5 options:

$6,700

$6,500

$6,381

none of the above

Question 6 (1 point)

You would like to establish a fund that will be used to offer a scholarship each year to a worthy student at your alma mater.You would like the total annual award to be $5,000, with the first award to be presented next year.Your alma mater is able to invest the funds at a constant, annual, tax-free rate of 8%.How much must you donate today to fund this award? Round your answer to the nearest dollar.

Question 6 options:

$62,500

$46,296

$67,500

$51,296

Question 7 (1 point)

A firm currently pays a dividend of $0.10 a share. The dividend is expected to grow at the rate of 16% for the next five years before slowing to a constant growth rate of 5% indefinitely. If you require an 18% return on this firm's stock, what is the maximum price you would pay for it?

Question 7 options:

$7.54

$16.63

$0.48

none of the above

Question 8 (1 point)

Blake has borrowed $30,000 on a 3-year note to buy a car. The loan requires equal monthly payments of principal and interest, with the first payment due one month after the loan is signed. The quoted interest rate is 7%. What will Blake's monthly payments be? Round your answer to the nearest dollar

Question 8 options:

$926

$260

$378

none of the above

Question 9 (1 point)

Calculate the monthly payment due on a 30 -year, fixed-rate, $250,000 mortgage if the quoted interest rate is 4.8%. Round your answer to the nearest cent.

Question 9 options:

$1,589.40

$1,311.66

$886.00

$1,200.00

Question 10 (1 point)

A $50,000, level-coupon Eurobond has a 6% coupon and matures in ten years. At what price should the bond sell today if the prevailing interest rate is 8% per annum? Round your answer to the nearest dollar.

Question 10 options:

$43,290

$29,870

$50,000

$57,360

Question 11 (1 point)

A financial advisor says she has an investment that will pay you $500 a month forever.It will cost you $25,000 today.What effective annual rate (EAR) will you earn on this investment?Round your answer to the nearest tenth of a percent

Question 11 options:

24.0%

26.8%

21.2%

20.0%

Question 12 (1 point)

Which of the following inputs is not needed when using the Gordon growth model to determine the market value of a share of stock?

Question 12 options:

the number of years the investor expects to own the stock

the expected growth rate of the dividends

the required rate of return for the stock

the dollar amount of the dividend payment

Question 13 (1 point)

According to a 1996 study, the CPI tends to

Question 13 options:

overstate the general increase in price levels

understate the general increase in price levels

be manipulated frequently by the government for political purposes

Both A and C are true

Question 14 (1 point)

If you make an investment that earns 10% the first year, -5% the second year, -2% the third year, and 12% the fourth year, what is your total 4 -year return? Round your answer to the nearest tenth of a percent

Question 14 options:

15.0%

31.9%

14.7%

None of the above

Question 15 (1 point)

If you make an investment that earns 10% the first year and loses 10% the second year, what is your total 2-year return?

Question 15 options:

0%

+5%

+1%

-1%

Question 16 (1 point)

In the United States, the inflation rate is measured by calculating the change in

Question 16 options:

long-term interest rates

short-term interest rates

the public price index

the consumer price index

Question 17 (1 point)

If the nominal interest rate is 14%, and inflation is 4%, what is the real interest rate?

Round your answer to the nearest tenth of a percent

Question 17 options:

9.1%

9.6%

11.9%

-8.8%

Question 18 (1 point)

A bond investment yielded 8%. If inflation was 3%, what real return did the bond offer? Round your answer to the nearest tenth of a percent

Question 18 options:

-4.6%

+1.0%

+4.9%

+5.2%

Question 19 (1 point)

The following data is provided for the S&P 500 index:

Year Total Return Year Total Return

1988 16.81% 1998 28.58%

1989 31.49% 1999 21.04%

1990 -3.17% 2000 -9.11%

1991 30.55% 2001 -11.88%

1992 7.67% 2002 -22.10%

1993 9.99% 2003 28.70%

1994 1% 2004 10.87%

1995 37.43% 2005 4.91%

1996 23.07% 2006 15.80%

1997 33.36% 2007 5.49%

Refer to the information above. Calculate the 20-year geometric average annual rate of return on the S&P 500 Index

Question 19 options:

13.04%

11.81%

10.54%

4.66%

Question 20 (1 point)

The market -beta of a stock

Question 20 options:

depicts the relationship between a stock expected return and its risk as measured by its standard deviation

reflects the degree to which the stocks return moves with the return on a market index

reflects the degree to which the stocks return varies with the company's earnings per share

reflects the degree to which the stocks return varies with inflation

Question 21 (1 point)

Which of the following statements about initial public offerings (IPOs) is (are) true?

Question 21 options:

An IPO refers to the initial sale of a firm's stock or bonds

The securities sold through an IPO are typically sold at a fixed price

The securities sold during an IPO tend to be underpriced

both B and C

Question 22 (1 point)

The following data is provided for the S&P 500 Index:

Year Total Return Year Total Return

1988 16.81% 1998 28.58%

1989 31.49% 1999 21.04%

1990 -3.17% 2000 -9.11%

1991 30.55% 2001 -11.88%

1992 7.67% 2002 -22.10%

1993 9.99% 2003 28.70%

1994 1.31% 2004 10.87%

1995 37.43% 2005 4.91%

1996 23.07% 2006 15.80%

1997 33.36% 2007 5.49%

Refer to the information above. Calculate the 20-year arithmetic average annual rate of return on the S&P 500 Index.

Question 22 options:

13.04%

11.81%

10.56%

none of the above

Question 23 (1 point)

Which of the following is a conclusion that can be drawn from the historical return data presented in this chapter?

Question 23 options:

An investment in any of the individual stocks would have provided you with higher returns than you would have earned by investing in a stock market index or in bonds

An investment in an individual stock would have provided you with a higher return than an investment in bonds, but you would have earned an even higher return by investing in the S&P 500 Index

An investment in individual stocks tends to be riskier than investing in a stock market index

Both A and C are true

Question 24 (1 point)

If a stock's returns tend to move in the opposite direction of the general stock market, its market-beta will be

Question 24 options:

greater than 1.0

equal to 0.0

a negative number

a nonsensical number

Question 25 (1 point)

Which of the following investment categories is likely to have a negative market -beta at any given point in time?

Question 25 options:

Treasury bonds

pharmaceutical stocks

gold

high-tech stocks