1. RentaWreckhastheopportunitytopurchaseanewwreckthatwillcost$600.Thewreckwillhelpgenerateadditionalcashflowsof$300attheendofeachofthenext3years.Ifthecostofcapitalfortheprojectis10%,thenwhatistheNPVoftheproject?

   $246.06

   $146.06

   $136.06

   $1,346.06

3. MorinCompany'sbondsmaturein8years,haveaparvalueof$1,000,andmakeanannualcouponinterestpaymentof$65.Themarketrequiresaninterestrateof7.7%onthesebonds.Whatisthebond'sprice?

   		$865.13
   		$1,097.69
   		$1,069.79
   		$930.25
   		$762.80

The value of any bond should equal to

its par value.

the future value of all the coupons added to the principal repayment at the bonds maturity.

the sum of all the coupons added to the principal repayment at the bonds maturity.

the present value of all the coupons added to the present value of the principal repayment at the bonds maturity.

1. A15-year,8%couponbondwithaparvalueof$1,000iscurrentlytradingat$958.Theyieldtomaturityofthisbondmustbe

   lessthan8%.

   equalto8%.

   greaterthan8%.

3. Thebetacoefficient

   		isastandardizedmeasureoftheriskperunitofreturn.
   		measuresthetendencyoftwostocksreturnstomovetogether.
   		isametricthatshowstheextenttowhichagivenstocksreturnsmoveupanddownwiththestockmarketportfolio.
   		measuresthatpartofasecuritysriskassociatedwithrandomeventsthatcanbeeliminatedbyproperdiversification.
   		isametricthatshowsthetendencyofagivenstocksreturnstomoveupanddownwithgovernmentbonds.

5. Which of the following securities has the greatest financial risk?

   		preferred stock
   		common stock
   		corporate bonds
   		U.S. Treasuries

7. Youownacommonstockthatjustpaidanannualdividendof$6.Thefirmexpectsthedividendstogrowata4%constantrate.Iftherequiredrateofreturnforthestockis10%,thenwhatisthepricethatyoushouldbeabletosellthestockfornow?

   		$60
   		$104
   		$100
   		$150

Which of the following is a characteristic of a well diversified portfolio?

high systematic risk

no systematic risk

none or very little unsystematic risk

very little systematic risk

The Sarbanes-Oxley Act of 2002

established the Securities and Exchange Commission.

requires CEO and CFOs of all large companies to personally certify their firms financial statements.

defined what ethical behavior is.

established that a CFO must be a member of the firms audit committee of the board of directors.

1. Which of the following is a strength of a sole proprietorship?

   Unlimited life

   Easy to form

   Limited liability

   Limited access to capital