WGU C214 COMPREHENSIVE EXAM UPDATED QUESTIONS
AND ANSWERS RATED A+
✔✔A company's year-end balance sheetfor 2013 shows the following:
Accounts receivable: $900
Inventory: $1200
Fixed assets: $1000
Accounts payable: $1300
Sales: $4000
Salaries expense: $275
What is their fixed asset turnover ratio? - ✔✔4.0
✔✔A firm has a ROE (return on equity) of 0.27 and the industry average ROE is 0.24.
Which conclusion would an analyst draw when comparing the firm to the industry? -
✔✔The firm is generating higher returns to owners than the industry.
✔✔What must have taken place for a firm to recognize revenue, in order for the firm to
comply with the accrual accounting rules? - ✔✔The product must have been delivered.
✔✔A teacher won $100,000 and invests this money for 5 years at an interest rate of 4%
(compounded
annually).
How much will the teacher have in principal and interest at the end of the 5 years? -
✔✔$121,665
✔✔An accountantis 40 years old with an anticipated retirement age of 70 years old. The
accountant plans to
save $6,000 per year at the end of the next 30 years to fund retirement. - ✔✔$336,510
✔✔An investor deposits $2,000 per year (beginning today) for 10 years in a 4% interest
bearing account. The
last cash flow is received 1 year prior to the end ofthe tenth year.
What is the investor's future balance after 10 years? - ✔✔$24,973
✔✔What is the par value (face value) of a bond? - ✔✔The sum of money that the
corporation promises to pay upon expiration of the bond.
✔✔A broker is considering purchasing common stock in a company that has average
but consistent operating
performance.
, Which factor should lead the broker to purchase shares in this company? - ✔✔The
current price of the stock is 25% below its intrinsic value.
✔✔A broker is considering buying a dividend-paying stock. The dividend will be paid
atthe end of the year.
The analyst consensus is the stock will be worth $36 in one year. The company pays a
$2.25 annual
dividend (ex dividend date is not a consideration,the broker will receive the full $2.25),
and the broker
expects a 12% rate of return
What is the highest price the broker should be willing to pay for the stock? - ✔✔$34.15
✔✔A person buys shares of a company at $45. They recently paid a $2 annual dividend
which is expected to
grow by 10% per year.
What is the expected return per year? - ✔✔14.9%
✔✔Which investment option is less desirable for a prudent investor? - ✔✔Quadrant 4,
bottom left, 3/4 to right side. Also E. for answer.
✔✔The market rate of return is 9%. The face value ofthe bond is $1000,the coupon rate
is 9% with annual
compounding, and the bond matures in 10 years.
What is the value of the bond? - ✔✔$1,000
✔✔Which statement is true about fluctuations in bond prices? - ✔✔When the market
interest rates fluctuate, the required rate of return equals the bond coupon rate.
✔✔A company issues bonds at a market price of $925. The face value is $1,000. The
bonds mature in 10 years,
and the coupon rate is 6% compounded semiannually.
What is the yield to maturity (YTM) on the company's bonds? - ✔✔7.06%
✔✔Which securities are issued by local governments and are usually tax exempt at the
federal level? - ✔✔Municipal bonds
✔✔A bond pays $27.50 semiannually, matures in 9 years, and is currently priced at
$1,090.
What is the yield to maturity for this bond? - ✔✔4.28%
AND ANSWERS RATED A+
✔✔A company's year-end balance sheetfor 2013 shows the following:
Accounts receivable: $900
Inventory: $1200
Fixed assets: $1000
Accounts payable: $1300
Sales: $4000
Salaries expense: $275
What is their fixed asset turnover ratio? - ✔✔4.0
✔✔A firm has a ROE (return on equity) of 0.27 and the industry average ROE is 0.24.
Which conclusion would an analyst draw when comparing the firm to the industry? -
✔✔The firm is generating higher returns to owners than the industry.
✔✔What must have taken place for a firm to recognize revenue, in order for the firm to
comply with the accrual accounting rules? - ✔✔The product must have been delivered.
✔✔A teacher won $100,000 and invests this money for 5 years at an interest rate of 4%
(compounded
annually).
How much will the teacher have in principal and interest at the end of the 5 years? -
✔✔$121,665
✔✔An accountantis 40 years old with an anticipated retirement age of 70 years old. The
accountant plans to
save $6,000 per year at the end of the next 30 years to fund retirement. - ✔✔$336,510
✔✔An investor deposits $2,000 per year (beginning today) for 10 years in a 4% interest
bearing account. The
last cash flow is received 1 year prior to the end ofthe tenth year.
What is the investor's future balance after 10 years? - ✔✔$24,973
✔✔What is the par value (face value) of a bond? - ✔✔The sum of money that the
corporation promises to pay upon expiration of the bond.
✔✔A broker is considering purchasing common stock in a company that has average
but consistent operating
performance.
, Which factor should lead the broker to purchase shares in this company? - ✔✔The
current price of the stock is 25% below its intrinsic value.
✔✔A broker is considering buying a dividend-paying stock. The dividend will be paid
atthe end of the year.
The analyst consensus is the stock will be worth $36 in one year. The company pays a
$2.25 annual
dividend (ex dividend date is not a consideration,the broker will receive the full $2.25),
and the broker
expects a 12% rate of return
What is the highest price the broker should be willing to pay for the stock? - ✔✔$34.15
✔✔A person buys shares of a company at $45. They recently paid a $2 annual dividend
which is expected to
grow by 10% per year.
What is the expected return per year? - ✔✔14.9%
✔✔Which investment option is less desirable for a prudent investor? - ✔✔Quadrant 4,
bottom left, 3/4 to right side. Also E. for answer.
✔✔The market rate of return is 9%. The face value ofthe bond is $1000,the coupon rate
is 9% with annual
compounding, and the bond matures in 10 years.
What is the value of the bond? - ✔✔$1,000
✔✔Which statement is true about fluctuations in bond prices? - ✔✔When the market
interest rates fluctuate, the required rate of return equals the bond coupon rate.
✔✔A company issues bonds at a market price of $925. The face value is $1,000. The
bonds mature in 10 years,
and the coupon rate is 6% compounded semiannually.
What is the yield to maturity (YTM) on the company's bonds? - ✔✔7.06%
✔✔Which securities are issued by local governments and are usually tax exempt at the
federal level? - ✔✔Municipal bonds
✔✔A bond pays $27.50 semiannually, matures in 9 years, and is currently priced at
$1,090.
What is the yield to maturity for this bond? - ✔✔4.28%
