QUESTION 1

Tina's Track Supply's market-to-book ratio is currently 4.5 times and PE ratio is 10.5 times. If Tina's Track Supply's common stock is currently selling at $100 per share, what is the book value per share and earnings per share?

1. $22.2222, $9.5238, respectively
2. $1,050, $450, respectively
3. $450, $1,050, respectively
4. $9.5238, $22.2222, respectively

QUESTION 2

Consider the following three bond quotes; a Treasury note quoted at 102.30, and a corporate bond quoted at 99.45, and a municipal bond quoted at 102.45. If the Treasury and corporate bonds have a par value of $1,000 and the municipal bond has a par value of $5,000, what is the price of these three bonds in dollars?

1. $1,002.30, $1,000, $1,000, respectively
2. $1,002.30, $994.50, $5,012.25 respectively
3. $1,000, $1,000, $5,000, respectively
4. $1,023.00, $994.50, $5,122.50, respectively

QUESTION 3

Which of the following statements is correct?

1. A single stock has more market risk than a diversified portfolio of stocks.
2. Bonds and stocks have a high correlation because they are both financial assets.
3. None of the statements are correct.
4. A single stock has a lot of diversifiable risk.

QUESTION 4

International Business Machines (IBM) has earnings per share of $6.85 and a P/E ratio of 15.19. What is the stock price?

1. $0.45
2. $2.22
3. $45.09
4. $104.05

QUESTION 5

A company's current stock price is $22.00 and its most recent dividend was $0.75 per share. Since analysts estimate the company will have a 12 percent growth rate, what is its expected return?

1. 3.48 percent
2. 15.82 percent
3. 3.00 percent
4. 12.00 percent

QUESTION 6

A 6 percent corporate coupon bond is callable in 10 years for a call premium of one year of coupon payments. Assuming a par value of $1,000, what is the price paid to the bondholder if the issuer calls the bond?

1. $1,060
2. $1,000
3. $60
4. $600

QUESTION 7

What is the future value of an $800 annuity payment over 15 years if the interest rates are 6 percent?

1. $1,917.25
2. $12,720.00
3. $7,002.99
4. $18,620.78

QUESTION 8

One-year Treasury bills currently earn 2.55 percent. You expect that one year from now, one-year Treasury bill rates will increase to 2.85 percent and that two years from now, one-year Treasury bill rates will increase to 3.15 percent. If the unbiased expectations theory is correct, what should the current rate be on 3-year Treasury securities?

1. 2.55 percent
2. 2.85 percent
3. 3.15 percent
4. 2.93 percent

QUESTION 9

Which of the following measures the number of days that the firm holds accounts payable before it has to extend cash to buy raw materials?

1. average payment period
2. average collection period
3. accounts receivable turnover
4. accounts payable turnover

QUESTION 10

Rachets R Us Corp. reported sales for 2013 of $200,000. Rachets R Us listed $25,000 of inventory on its balance sheet. Using a 365-day year, how many days did Rachets R Us's inventory stay on the premises? How many times per year did Rachets R Us's inventory turnover?

1. 0.125 days, 5 times, respectively
2. 45.625 days, 8 times, respectively
3. 0.125 days, 8 times, respectively
4. 45.625 days, 5 times respectively

QUESTION 11

Calculate the price of a zero coupon bond that matures in five years if the market interest rate is 7.50 percent. (Assume semi-annual compounding and $1,000 par value.)

1. $696.57
2. $1,000.00
3. $962.50
4. $692.02

QUESTION 12

You are considering a stock investment in one of two firms (A and B), both of which operate in the same industry. A finances its $20 million in assets with $18 million in debt and $2 million in equity. B finances its $20 million in assets with $2 million in debt and $18 million in equity. Calculate the debt-to-equity ratio for the two firms.

1. Firm A: 19 times; Firm B: 0.11 times
2. Firm A: 19 times; Firm B: 1.11 times
3. Firm A: 9 times; Firm B: 1.11 times
4. Firm A: 9 times; Firm B: 0.11 times

QUESTION 13

Which of the following is a debt security whose payments originate from other loans, such as credit card debt, auto loans, and home equity loans?

1. Debentures
2. Credit quality securities
3. Asset-backed securities
4. Junk bonds

QUESTION 14

In 2018, Lower Case Productions had cash flows from investing activities of +$50,000 and cash flows from financing activities of +$100,000. The balance in the firm's cash account was $80,000 at the beginning of 2018 and $65,000 at the end of the year. What was Lower Case's cash flow from operations for 2018?

1. -$65,000
2. -$165,000
3. -$15,000
4. -$150,000

QUESTION 15

We can estimate a stock's value by:

1. using the book value of the total stockholder equity section.
2. discounting the future dividends and future stock price appreciation.
3. using the book value of the total assets divided by the number of shares outstanding.
4. compounding the past dividends and past stock price appreciation.

QUESTION 16

At your discount brokerage firm, it costs $9.95 per stock trade. How much money do you need to buy 100 shares of Ralph Lauren (RL), which trades at $85.13?

1. $8,522.95
2. $8,503.00
3. $8,503.05
4. $9,508.00

QUESTION 17

An example of an illiquid asset is

1. U.S. Treasury bill.
2. bonds issued by GM.
3. common stock issued by a small but financially strong firm.
4. common stock issued by Apple Inc.

QUESTION 18

To find the percentage return of an investment:

1. divide the dollar return by the investment's value at the end of the period.
2. divide the dollar return by the investment's value at the beginning of the period.
3. multiply the dollar return by the investment's value at the end of the period.
4. multiply the dollar return by the investment's value at the beginning of the period.

QUESTION 19

Which of the following is the use of debt to increase an investment position?

1. Financial leverage
2. Probability
3. Stock market bubble
4. Behavioral finance

QUESTION 20

Rank the following three stocks by their risk-return relationship, best to worst. Rail Haul has an average return of 8 percent and standard deviation of 10 percent. The average return and standard deviation of Idol Staff are 10 percent and 20 percent; and of Poker-R-Us are 6 percent and 15 percent.

1. Poker-R-Us, Idol Staff, Rail Haul
2. Rail Haul, Idol Staff, Poker-R-Us
3. Idol Staff, Rail Haul, Poker-R-Us
4. Idol Staff, Poker-R-Us, Rail Haul