FIN380 FINAL ACTUAL EXAM PAPER 2026
QUESTIONS WITH ANSWERS GRADED A+
• Chapter 3.
Answer: 3
• The buyer of a call option expects prices to ______________, while the
seller expects prices to _____________. On the other hand, the buyer of a
put option expects prices to _______________, while the seller expects
prices to _____________..
Answer: rise, fall or stay the same, fall, rise or stay the same
• Firms with higher expected growth rates tend to have P/E ratios that are
___________ the P/E ratios of firms with lower expected growth rates..
Answer: higher than
• __________ fund is defined as one where the fund charges a sales
commission to either buy into or exit the fund..
Answer: Load
• Everything else equal the __________ the maturity of a bond and the
__________ the coupon the greater the sensitivity of the bond's price to
interest rate changes..
Answer: longer; lower
• What is the future value ten years from now of $2,500 invested at 3% APR
compounded monthly?.
Answer: N= 10*12 I/Y= 3/12 PV= 2500 FV= CPT Answer: 3373.38
• Rank the following fund category from most risky to least risky. I. Equity
growth fund II. Balanced fund III. Sector fund IV. Money market fund.
Answer: III, I, II, IV
• Even if the markets are efficient, professional portfolio management is still
important because it provides investors with _________. I. low cost
diversification II. provides a portfolio with a specified risk level III.
, provides better risk adjusted returns than an index.
Answer: I and II only
• The duration of a portfolio of bonds can be calculated as
_______________..
Answer: the value weighed average of the durations of the individual bonds
in the portfolio
• All other things equal, a bond's duration is _________..
Answer: lower when the coupon rate is higher
• Consider two bonds, A and B. Both bonds presently are selling at their par
value of $1,000. Each pay interest of $120 annually. Bond A will mature in
5 years while bond B will mature in 6 years. If the yields to maturity on the
two bonds change from 12% to 14%, _________..
Answer: both bonds will decrease in value but bond B will decrease more
than bond A
• A $20,000 investment compounds monthly for 120 months and grows into
$27,000. What is the APR earned by this investment?.
Answer: Answer: 3.00% N= PV= FV= I/y=CPT CPT answer*12
• XYZ bonds sell for $900. They have a $1,000 par value, 8% coupon rate
with semiannual coupons, and 8 years to maturity. What is the pre-tax cost
of debt?.
Answer: Answer: 9.83 Pre-tax cost of debt is YTM n= 8*2 pv= -900 Pmt=
40 FV= 1000 I/y=CPT*2
• IF you want to have $3,000,000 at retirement in 44 years how much money
must you put in a retirement savings each month? Assume the account pays
8.4% APR compounded monthly..
Answer: Answer: 541.65 N= 44*12 I/y= 8.4/12 FV= 3,000,000 PMT=CPT
• In the current year a company paid interest of $40,000, had net capital
expenditures of $300,000 and issued net new debt fo $75,000. In addition,
the company reported cash flow from operating activities of $600,000, Cash
flow from investing activities of ($250,000), and cash flow from financing
, activities of $65,000. The marginal tax rate is 35%. Compute the free cash
flow to equity holders..
Answer: Answer: $375,000 Free cash flow to Equity= CFO- CAPEX+ Net
Borrowing 600,000- 300,00+75,000=
• Chapter 4.
Answer: 4
• For the current year sales are $1,400,000, current assets are $101,524, and
current liabilities are $85,265. IF sales are forecasted to increase 12% next
year and all current assets and current liabilities vary proportionally with
sales, what is the forecasted amount of net working capital next year.
Answer: Answer: 18,210 NWC= CA - CL Next years NWC= NWC * 1.12
(101,524-85,265)*1.12
• Which of the following set of conditions will result in a bond with the
greatest price volatility?.
Answer: A low coupon and a long maturity.
• __________ funds stand ready to redeem or issue shares at their net asset
value..
Answer: Open-End
• All other things equal, a bond's duration is _________..
Answer: lower when the coupon rate is higher
• XYZ Co stock sells for $42 and just paid a dividend of $1.75. Dividends are
expected to grow at a rate fo 4% forever. What is the cost of common
equity?.
Answer: Answer: 8.33 1.75* ( 1 +.04)/42+ .04
• Chapter 5.
Answer: 5
• The weak form of the EMH states that ________ must be reflected in the
current stock price..
Answer: all past information including security price and volume data
QUESTIONS WITH ANSWERS GRADED A+
• Chapter 3.
Answer: 3
• The buyer of a call option expects prices to ______________, while the
seller expects prices to _____________. On the other hand, the buyer of a
put option expects prices to _______________, while the seller expects
prices to _____________..
Answer: rise, fall or stay the same, fall, rise or stay the same
• Firms with higher expected growth rates tend to have P/E ratios that are
___________ the P/E ratios of firms with lower expected growth rates..
Answer: higher than
• __________ fund is defined as one where the fund charges a sales
commission to either buy into or exit the fund..
Answer: Load
• Everything else equal the __________ the maturity of a bond and the
__________ the coupon the greater the sensitivity of the bond's price to
interest rate changes..
Answer: longer; lower
• What is the future value ten years from now of $2,500 invested at 3% APR
compounded monthly?.
Answer: N= 10*12 I/Y= 3/12 PV= 2500 FV= CPT Answer: 3373.38
• Rank the following fund category from most risky to least risky. I. Equity
growth fund II. Balanced fund III. Sector fund IV. Money market fund.
Answer: III, I, II, IV
• Even if the markets are efficient, professional portfolio management is still
important because it provides investors with _________. I. low cost
diversification II. provides a portfolio with a specified risk level III.
, provides better risk adjusted returns than an index.
Answer: I and II only
• The duration of a portfolio of bonds can be calculated as
_______________..
Answer: the value weighed average of the durations of the individual bonds
in the portfolio
• All other things equal, a bond's duration is _________..
Answer: lower when the coupon rate is higher
• Consider two bonds, A and B. Both bonds presently are selling at their par
value of $1,000. Each pay interest of $120 annually. Bond A will mature in
5 years while bond B will mature in 6 years. If the yields to maturity on the
two bonds change from 12% to 14%, _________..
Answer: both bonds will decrease in value but bond B will decrease more
than bond A
• A $20,000 investment compounds monthly for 120 months and grows into
$27,000. What is the APR earned by this investment?.
Answer: Answer: 3.00% N= PV= FV= I/y=CPT CPT answer*12
• XYZ bonds sell for $900. They have a $1,000 par value, 8% coupon rate
with semiannual coupons, and 8 years to maturity. What is the pre-tax cost
of debt?.
Answer: Answer: 9.83 Pre-tax cost of debt is YTM n= 8*2 pv= -900 Pmt=
40 FV= 1000 I/y=CPT*2
• IF you want to have $3,000,000 at retirement in 44 years how much money
must you put in a retirement savings each month? Assume the account pays
8.4% APR compounded monthly..
Answer: Answer: 541.65 N= 44*12 I/y= 8.4/12 FV= 3,000,000 PMT=CPT
• In the current year a company paid interest of $40,000, had net capital
expenditures of $300,000 and issued net new debt fo $75,000. In addition,
the company reported cash flow from operating activities of $600,000, Cash
flow from investing activities of ($250,000), and cash flow from financing
, activities of $65,000. The marginal tax rate is 35%. Compute the free cash
flow to equity holders..
Answer: Answer: $375,000 Free cash flow to Equity= CFO- CAPEX+ Net
Borrowing 600,000- 300,00+75,000=
• Chapter 4.
Answer: 4
• For the current year sales are $1,400,000, current assets are $101,524, and
current liabilities are $85,265. IF sales are forecasted to increase 12% next
year and all current assets and current liabilities vary proportionally with
sales, what is the forecasted amount of net working capital next year.
Answer: Answer: 18,210 NWC= CA - CL Next years NWC= NWC * 1.12
(101,524-85,265)*1.12
• Which of the following set of conditions will result in a bond with the
greatest price volatility?.
Answer: A low coupon and a long maturity.
• __________ funds stand ready to redeem or issue shares at their net asset
value..
Answer: Open-End
• All other things equal, a bond's duration is _________..
Answer: lower when the coupon rate is higher
• XYZ Co stock sells for $42 and just paid a dividend of $1.75. Dividends are
expected to grow at a rate fo 4% forever. What is the cost of common
equity?.
Answer: Answer: 8.33 1.75* ( 1 +.04)/42+ .04
• Chapter 5.
Answer: 5
• The weak form of the EMH states that ________ must be reflected in the
current stock price..
Answer: all past information including security price and volume data
