1. Which of the following statements is CORRECT?

   The financial manager's proper goal should be to attempt to maximize the firm's expected cash flows, since that will add the most to the individual shareholders' wealth.

   The financial manager should seek that combination of assets, liabilities, and capital that will generate the largest expected projected after-tax income over the relevant time horizon, generally the coming year.

   The riskiness inherent in a firm's earnings per share (EPS) depends on the characteristics of the projects the firm selects, and thus on the firm's assets. A good goal for a firm's management is maximization of expected EPS.

   Potential agency problems can arise between managers and stockholders, because managers hired as agents to act on behalf of the owners may instead make decisions favorable to themselves rather than the stockholders.

1. A 10-year bond with a 7% annual coupon has a yield to maturity of 8%. Which of the following statements is CORRECT?

   The bond is selling at its par value.

   The bond is selling at a premium.

   If the yield to maturity remains constant, the bond's price one year from now will be lower than its current price.

   If the yield to maturity remains constant, the bond's price one year from now will be higher than its current price.

1. How many years will it take for your funds to triple if a bank pays you an annual rate of 3.8% and compounded monthly?

   26.26

   27.58

   28.96

   29.46

1. You buy a house of $800,000 today. You put a down payment of 20% and borrow a fixed-rate mortgage of $640,000 with monthly payments, annual interest rate of 3.5% and 30 years. After 5 years, market interest rate goes up to 6.5%. How much money will you make in book from the mortgage if you continue to pay the monthly mortgages for the next 25 years and the market interest rate will stay the same as 6.5%?

   $94,966

   $99,431

   $148,431

   $188,431