BFIN 322 Unit 1 Quizzes Questions
with All Correct Answers
Assume the total expense for your current year in college equals $20,000. How much
would your parents have needed to invest 21 years ago in an account paying 8%
compounded annually to cover this amount? - Answer-$3,973.11
How much must be deposited today in an account earning 6% annually to accumulate a
20% down payment to use in purchasing a car one year from now, assuming that the
car's current price is $20,000 and inflation will be 4%? - Answer-$3,924.53
Assume a bond is currently selling at par value. What will happen if the bond's expected
cash flows are discounted at a rate lower than the bond's coupon rate? - Answer-The
price of the bond will increase
Your car loan requires payments of $200 per month for the first year and payments of
$400 per month during the second year. The annual interest rate is 12% and payments
begin in one month. What is the present value of this 2 year loan? - Answer-$6,246.34
Under which of the following conditions will a future value calculated with simple interest
exceed a future value calculated with compound interest at the same rate? - Answer-
This is not possible with positive interest rates
A bond has a coupon rate of 8%, pays interest semiannually, sells for $960, and
matures in 3 years. What is its yield to maturity? - Answer-9.57%
If the coupon rate on an outstanding bond is lower than the relevant current interest
rate, then the yield to maturity would be - Answer-higher than the coupon rate
Which one of the following bond values will change when interest rates change? -
Answer-The present value
How much does the $1,000 to be received upon a bond's maturity in 4 years add to the
bond's price if the appropriate discount rate is 6%? - Answer-$792.09
What is the future value of $10,000 on deposit for 5 years at 6% simple interest? -
Answer-$13,000.00
, Which of the following must be correct for a bond currently selling at a premium? -
Answer-its current yield is lower than its coupon rate
Cash flows occurring in different periods should not be compared unless - Answer-the
flows have been discounted to a common date
How much must be invested today in order to generate a 5-year annuity of $1,000 per
year, with the first payment 1 year from today, at an interest rate of 12%? - Answer-
$3,604.78
Which one of the following is fixed for the life of a given bond? - Answer-Coupon rate
How much interest is earned in just the third year on a $1,000 deposit that earns 7%
interest compounded annually? - Answer-$80.14
What is the rate of return for an investor who pays $1,054.47 for a 3-year bond with
coupon of 6.5% and sells the bond 1 year later for $1,037.19? - Answer-4.53%
The salesperson offers, "Buy this new car for $25,000 cash or, with an appropriate
down payment, pay $500 per month for 48 months at 8% interest." Assuming that the
salesperson does not offer a free lunch, calculate the "appropriate" down payment -
Answer-$4,519.04
If a firm unexpectedly raises its dividend permanently and by a substantial amount, the
firm's stock price - Answer-should rise, given dividend discount models
A fundamental analyst - Answer-studies a firm's financial statements to determine
pricing inefficiencies
Based on the random walk theory, if a stock's price decreased last week, then this week
the price - Answer-has an equal chance of going either up or down
What is the expected constant-growth rate of dividends for a stock currently priced at
$50, that just paid a dividend of $4, and has a required return of 18%? - Answer-9.26%
What proportion of earnings is being plowed back into the firm if the sustainable growth
rate is 8% and the firm's ROE is 20% - Answer-40%
What should be the stock value one year from today for a stock that currently sells for
$35, has a required return of 15%, an expected dividend of $2.80, and a constant
dividend growth rate of 7%? - Answer-37.45
Technical analysts are most likely to be successful in a market that is considered to be -
Answer-less than weak-form efficient
with All Correct Answers
Assume the total expense for your current year in college equals $20,000. How much
would your parents have needed to invest 21 years ago in an account paying 8%
compounded annually to cover this amount? - Answer-$3,973.11
How much must be deposited today in an account earning 6% annually to accumulate a
20% down payment to use in purchasing a car one year from now, assuming that the
car's current price is $20,000 and inflation will be 4%? - Answer-$3,924.53
Assume a bond is currently selling at par value. What will happen if the bond's expected
cash flows are discounted at a rate lower than the bond's coupon rate? - Answer-The
price of the bond will increase
Your car loan requires payments of $200 per month for the first year and payments of
$400 per month during the second year. The annual interest rate is 12% and payments
begin in one month. What is the present value of this 2 year loan? - Answer-$6,246.34
Under which of the following conditions will a future value calculated with simple interest
exceed a future value calculated with compound interest at the same rate? - Answer-
This is not possible with positive interest rates
A bond has a coupon rate of 8%, pays interest semiannually, sells for $960, and
matures in 3 years. What is its yield to maturity? - Answer-9.57%
If the coupon rate on an outstanding bond is lower than the relevant current interest
rate, then the yield to maturity would be - Answer-higher than the coupon rate
Which one of the following bond values will change when interest rates change? -
Answer-The present value
How much does the $1,000 to be received upon a bond's maturity in 4 years add to the
bond's price if the appropriate discount rate is 6%? - Answer-$792.09
What is the future value of $10,000 on deposit for 5 years at 6% simple interest? -
Answer-$13,000.00
, Which of the following must be correct for a bond currently selling at a premium? -
Answer-its current yield is lower than its coupon rate
Cash flows occurring in different periods should not be compared unless - Answer-the
flows have been discounted to a common date
How much must be invested today in order to generate a 5-year annuity of $1,000 per
year, with the first payment 1 year from today, at an interest rate of 12%? - Answer-
$3,604.78
Which one of the following is fixed for the life of a given bond? - Answer-Coupon rate
How much interest is earned in just the third year on a $1,000 deposit that earns 7%
interest compounded annually? - Answer-$80.14
What is the rate of return for an investor who pays $1,054.47 for a 3-year bond with
coupon of 6.5% and sells the bond 1 year later for $1,037.19? - Answer-4.53%
The salesperson offers, "Buy this new car for $25,000 cash or, with an appropriate
down payment, pay $500 per month for 48 months at 8% interest." Assuming that the
salesperson does not offer a free lunch, calculate the "appropriate" down payment -
Answer-$4,519.04
If a firm unexpectedly raises its dividend permanently and by a substantial amount, the
firm's stock price - Answer-should rise, given dividend discount models
A fundamental analyst - Answer-studies a firm's financial statements to determine
pricing inefficiencies
Based on the random walk theory, if a stock's price decreased last week, then this week
the price - Answer-has an equal chance of going either up or down
What is the expected constant-growth rate of dividends for a stock currently priced at
$50, that just paid a dividend of $4, and has a required return of 18%? - Answer-9.26%
What proportion of earnings is being plowed back into the firm if the sustainable growth
rate is 8% and the firm's ROE is 20% - Answer-40%
What should be the stock value one year from today for a stock that currently sells for
$35, has a required return of 15%, an expected dividend of $2.80, and a constant
dividend growth rate of 7%? - Answer-37.45
Technical analysts are most likely to be successful in a market that is considered to be -
Answer-less than weak-form efficient
