QUESTION 1

1. The bonds issued by Jensen & Son bear a 6 percent coupon, payable semiannually. The bond matures in 8 years and has a $1,000 face value. Currently, the bond sells at par. What is the yield to maturity?

	A.	5.87 percent
	B.	5.97 percent
	C.	6.00 percent
	D.	6.09 percent
	E.	6.17 percent

QUESTION 2

A General Co. bond has an 8 percent coupon and pays interest annually. The face value is $1,000 and the current market price is $1,020.50. The bond matures in 20 years. What is the yield to maturity?

	A.	7.79 percent
	B.	7.82 percent
	C.	8.00 percent
	D.	8.04 percent
	E.	8.12 percent

QUESTION 3

You intend to purchase a 10-year, $1,000 face value bond that pays interest of $60 every 6 months (semiannual). If your nominal annual required rate of return is 10 percent with semiannual payments, how much should you be willing to pay for this bond?

	A.	$ 826.31
	B.	$1,086.15
	C.	$ 957.50
	D.	$1,431.49
	E.	$1,124.62

QUESTION 4

The Seattle Corporation has been presented with an investment opportunity which will yield end-of-year cash flows as follows:

Years 1 through 4 $30,000 per year

Years 5 through 9 $35,000 per year

Year 10 $40,000 per year

This investment will cost the firm $150,000 today, and the firm's cost of capital is 10 percent. What is the NPV for this investment?

	A.	$135,984
	B.	$ 18,023
	C.	$219,045
	D.	$ 51,138
	E.	$ 92,146

QUESTION 5

Your firm wants to save $250,000 to buy some new equipment three years from now. The plan is to set aside an equal amount of money on the first day of each year starting today. The firm can earn a 4.7 percent rate of return. How much does the firm have to save each year to achieve their goal?

	A.	$75,966.14
	B.	$76,896.16
	C.	$78,004.67
	D.	$81.414.14
	E.	$83,333.33

QUESTION 6

Your great-aunt left you an inheritance in the form of a trust. The trust agreement states that you are to receive $2,500 on the first day of each year, starting immediately and continuing for fifty years. What is the value of this inheritance today if the applicable discount rate is 6.35 percent?

	A.	$36,811.30
	B.	$37,557.52
	C.	$39,204.04
	D.	$39,942.42
	E.	$40,006.09

QUESTION 7

Your car dealer is willing to lease you a new car for $299 a month for 60 months. Payments are due on the first day of each month starting with the day you sign the lease contract. If your cost of money is 4.9 percent, what is the current value of the lease?

	A.	$15,882.75
	B.	$15,906.14
	C.	$15,947.61
	D.	$16,235.42
	E.	$16,289.54

QUESTION 8

Toni adds $3,000 to her savings on the first day of each year. Tim adds $3,000 to his savings on the last day of each year. They both earn a 9 percent rate of return. What is the difference in their savings account balances at the end of thirty years?

	A.	$35,822.73
	B.	$36,803.03
	C.	$38,911.21
	D.	$39,803.04
	E.	$40,115.31

QUESTION 9

Marko, Inc. is considering the purchase of ABC Co. Marko believes that ABC Co. can generate cash flows of $5,000, $9,000, and $15,000 over the next three years, respectively. After that time, they feel the business will be worthless. Marko has determined that a 14 percent rate of return is applicable to this potential purchase. What is Marko willing to pay today to buy ABC Co.?

	A.	$19,201.76
	B.	$21,435.74
	C.	$23,457.96
	D.	$27,808.17
	E.	$31,758.00

QUESTION 10

You have some property for sale and have received two offers. The first offer is for $189,000 today in cash. The second offer is the payment of $100,000 today and an additional $100,000 two years from today. If the applicable discount rate is 8.75 percent, which offer should you accept and why?

	A.	You should accept the $189,000 today because it has the higher net present value.
	B.	You should accept the $189,000 today because it has the lower future value.
	C.	You should accept the second offer because you will receive $200,000 total.
	D.	You should accept the second offer because you will receive an extra $11,000.
	E.	You should accept the second offer because it has a present value of $194,555.42.