Exam 500301 future cash | Management homework help


1.   Amortized loans must have which one of these   characteristics? 



A. One lump sum     principal payment 


 B. Either     equal or unequal principal payments over the life of the loan 


C. Increasing     payments over the life of the loan 


D. Equal interest     payments over the life of the loan 


2.   Why is “preferred” stock given that       name? 



A. Despite its         deceptive name, preferred stock is actually a special kind of debt with         a AAA rating, and the debt holders can vote in stockholder elections. 


B. It’s stock         that’s preferred by investors because of its high performance and the         fact that it’s in the S&P 500 and other stock market indexes. 


C. While all         stockholders have rights to dividends, preferred stockholders also can         vote on changes to the corporate charter and can vote to hire and fire         executives, whereas common stockholders can’t. 


D. Preferred stockholders have preferential treatment         over common stockholders; they’re usually paid first and sometimes have         additional voting rights.


3.   Would you expect to pay a higher interest           rate for an unsecured loan for $2,000 or a secured loan for the same           amount? 



A. The             rate for both would be about the same on average. 


B. The             secured loan would be at a higher rate. 


C. The unsecured loan would be at a higher             rate. 


D. The             rate for each loan would vary based on inflation. 


4.                 What’s the present value of $4,500, discounted at eight-percent               interest per period, for two periods? (Round your answer to the               nearest dollar.) 



A. $3,858 


B. $4,160 


C. $3,932 


D. $4,166 


5.   Which of the following is a network-based,   over-the-counter exchange, with no physical marketplace? 



A. NYSE (New York Stock Exchange) 


B. NYMEX (New York     Mercantile Exchange) 


C. NASDAQ     (National Association of Securities Dealers Automated Quotations) 

D. WSJ (Wall Street Journal)



6.   You can’t attend the shareholder’s meeting for       Alpha United, so you authorize another shareholder to vote on your       behalf. The granting of this authority is called 



A. alternative         voting. 


B. straight         voting. 


C. voting by proxy. 


D. cumulative         voting. 



7.   New Homes has a bond issue with a coupon rate of       5½ percent that matures in 8½ years. The bonds have a par value of $1,000       and a market price of $972. Interest is paid semiannually. What’s the       yield to maturity? 



A. 6.36         percent 


B. 6.42         percent 


C. 5.74         percent 


D. 5.92 percent 



8.   A floor broker on the NYSE 



A. trades             for his or her personal inventory. 


B. supervises             the commission brokers of a specific financial firm. 


 C. executes orders on behalf of a commission             broker. 


D. maintains             an inventory and assumes the role of a market maker. 


9.                 What’s it called when we use a table or spreadsheet to track a               loan balance, payments, and the portion of these payments that               can be attributed to interest and paying off the principal? 



A. Loan tracking 


B. Loan matrix 


C. Loan amortization 


D. Loan payment plan 



10.                     Most investments can be valued by looking at all                   future cash flows. The cash flows from stocks are usually                   paid as 



A. net income. 


B. bond yields. 


C.                     dividends. 


D. capital gains. 



11.   Three Corners Markets paid an                       annual dividend of $1.37 a share last month. Today, the                       company announced that future dividends will be                       increasing by 2.8 percent annually. If you require a                       return of 11.6 percent, how much are you willing to pay to                       purchase one share of this stock today? 



A.                         $15.57 


                         B. $16.00 


C.                         $16.67 


D.                         $18.23 



12.   You own a                           classic car currently valued at $64,000. If the value                           increases by 2½ percent annually, how much will the                           car be worth 15 years from now? 



A.                             $86,008.17 


 B. $92,691.08 


C.                             $80,013.38 


D.                             $91,480.18 



13.   The next dividend (D1) for the Jimmy Company will be $6                               per share. Investors require a 20-percent return                               on companies such as the Jimmy Company. Jimmy’s                               dividends are expected to increase by 10 percent                               every year. Based on the dividend growth model,                               what’s the value of the stock today? 



A. $60 


B. $30 


C. $66 


D. $120




14.   Suppose that you buy a $2,000                         bond with a 10-percent annual coupon, payable                         semiannually on January 1st and July 1st. On both                         January 1st and July 1st, the bondholder will receive                         $100 for a total annual interest payment of $200 ($100                         + $100). Based on the principal and accrued interest                         only, how much would you expect to pay to purchase this                         bond on April 1st? 



A. $2,050 


B.                           $2,000 


C.                           $2,100 


D.                           $2,200


15.                               Assume that a corporation wants to borrow                             $100,000 by issuing one hundred 10-year, $1,000                             bonds. The interest rate required for similar bonds                             from similar corporations is 11 percent. What’s the                             bond’s face value? 



A. $111,000 


B. $1,000 


C. $1,110 


 D. $110 


16.   Today, you deposit                                 $1,500 into an account that pays six-percent                                 interest annually. How much will you have in                                 the account after five years? (Round your                                 answer to the nearest dollar.) 



A. $2,007 


B. $2,097 


C. $1,894 


D. $1,950 



17.   Megan is thinking                                     about creating a small college fund for her                                     daughter, Jayda, to help Jayda with the first                                     year of tuition. Jayda is four years from                                     starting university, and Megan estimates                                     that tuition will be about $10,000. Megan                                     has $10,000 today, but she wants to spend                                     some of it on a new computer. How much of                                     the $10,000 will Megan need to invest today                                     in an account with a seven-percent interest                                     rate to have enough in four years to pay                                     for the first year of college? (Round your                                     answer to the nearest dollar.) 



A. 7,200 


B. 7,932 


 C. 7,629 


D. 8,327 



18.   While                                         researching construction loans, you                                         discover you can take out a Bank of                                         America five-year, $200,000 loan with                                         eight-percent interest compounded                                         annually, or a Chase Bank loan with the                                         same terms—except that the                                         eight-percent interest is compounded                                         semiannually. You know you won’t be                                         able to make any payments on the loan                                         until you sell the building at the end                                         of year five. Which loan will result in                                         the lowest interest expense? 



A. The Chase Bank loan 


 B. The Bank of                                         America loan 


C. It doesn’t make any                                         difference; the interest expense will                                         be the same. 


D. It isn’t possible to                                         determine the interest expense of these                                         loans with the information provided. 



19.   What’s the                                         present value of the right to receive                                         three equal payments, with the first                                         payment starting today (annuity due) of                                         $9,000 per period, discounted at a rate                                         of 10 percent per period? (Round your                                         answer to the nearest dollar.) 



A.                                         $24,620 


B. $27,000 


C. $22,382 


D. $15,620 




20.   The Pet                                         Tracker Company announced that their                                         dividend next year (D1) will                                         be $18 per share. Investors require a                                         25-percent return on companies such as                                         the Pet Tracker. The firm’s dividends                                         are expected to increase by five                                         percent every year. Based on the                                         dividend growth model, what’s the value                                         of the stock today? 



A. $95 


B. $45 


C. $72 


D. $90 



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