PRINCIPLES OF CORPORATE FINANCE FINAL EXAM REVIEW
1. Chapter 4: Concept Questions
2. South General pays 2.5 percent interest, compounded annually, on its sav-
ings accounts. Northern Bank pays 2.5 percent simple interest on its savings
accounts. You want to deposit sufficient funds today so that you have $1,500
inn your account 2 years from today. The amount you must deposit today:
A. is the same regardless of which bank you choose because they both pay
the same rate of interest
B. is the same regardless of which bank you choose because they both pay
simple interest
C. is the same regardless of which bank you choose because the time period
is the same for both banks
D. will be greater if you invest with South Central Bank
E. will be greater if you invest with Northern Bank: E. will be greater if you invest
with Northern Bank
3. Rob wants to invest $15,000 for 7 years. Which one of the following rates will
provide him with the largest future value?
A.3 percent simple interest
B.3 percent interest, compounded annually
C. 2 percent interest, compounded annually
D. 4 percent simple interest
E. 4 percent interest, compounded annually: E. 4 percent interest, compounded
annually
4. Marcos is investing $5 today at 7 percent interest so he can have $35 later.
The $35 is referred to as the:
A. true value
B. future value
C. present value
, PRINCIPLES OF CORPORATE FINANCE FINAL EXAM REVIEW
D. discounted value
E. complex value: B. future value
5. Lisa has $1000 in cash today. Which one of the following investment options
is most apt to double her money?
A.6 percent interest for 3 years
B. 12 percent interest for 5 years
C. 7 percent interest for 9 years
D. 8 percent interest for 9 years
E. 6 percent interest for 10 years: D. 8 percent interest for 9 years
6. Lester has $6,270 in his savings account at the beginning of this year. This
amount includes both the $6,000 he originally invested at the beginning of
last year plus the $270 he earned in interest last year. Lester earned a total
of $282.15 in interest even though the interest rate on the account remained
constant. This $282.25 is best described as:
A. simple interest
B. interest on interest
C. discounted interest
D. complex interest
E. compound interest: E. compound interest
7. Chapter 5: Chapter Concepts
8. Which one of the following statements is correct?
A. The APR is equal to the EAR for a loan that charges interest monthly.
B. The EAR is always greater than the APR.
C. The APR on a monthly loan is equal to (1+ monthly interest rate)*12-1
D The APR is the best measure of the actual rate you are paying on a loan.
E. The EAR, rather than the APR, should be used to compare both investment
and loan options.: E. The EAR, rather than the APR, should be used to compare
both investment and loan options.
9. Assume all else, is equal. When comparing saving accounts, you should
select the account that has the:
A. lowest annual percentage rate
1. Chapter 4: Concept Questions
2. South General pays 2.5 percent interest, compounded annually, on its sav-
ings accounts. Northern Bank pays 2.5 percent simple interest on its savings
accounts. You want to deposit sufficient funds today so that you have $1,500
inn your account 2 years from today. The amount you must deposit today:
A. is the same regardless of which bank you choose because they both pay
the same rate of interest
B. is the same regardless of which bank you choose because they both pay
simple interest
C. is the same regardless of which bank you choose because the time period
is the same for both banks
D. will be greater if you invest with South Central Bank
E. will be greater if you invest with Northern Bank: E. will be greater if you invest
with Northern Bank
3. Rob wants to invest $15,000 for 7 years. Which one of the following rates will
provide him with the largest future value?
A.3 percent simple interest
B.3 percent interest, compounded annually
C. 2 percent interest, compounded annually
D. 4 percent simple interest
E. 4 percent interest, compounded annually: E. 4 percent interest, compounded
annually
4. Marcos is investing $5 today at 7 percent interest so he can have $35 later.
The $35 is referred to as the:
A. true value
B. future value
C. present value
, PRINCIPLES OF CORPORATE FINANCE FINAL EXAM REVIEW
D. discounted value
E. complex value: B. future value
5. Lisa has $1000 in cash today. Which one of the following investment options
is most apt to double her money?
A.6 percent interest for 3 years
B. 12 percent interest for 5 years
C. 7 percent interest for 9 years
D. 8 percent interest for 9 years
E. 6 percent interest for 10 years: D. 8 percent interest for 9 years
6. Lester has $6,270 in his savings account at the beginning of this year. This
amount includes both the $6,000 he originally invested at the beginning of
last year plus the $270 he earned in interest last year. Lester earned a total
of $282.15 in interest even though the interest rate on the account remained
constant. This $282.25 is best described as:
A. simple interest
B. interest on interest
C. discounted interest
D. complex interest
E. compound interest: E. compound interest
7. Chapter 5: Chapter Concepts
8. Which one of the following statements is correct?
A. The APR is equal to the EAR for a loan that charges interest monthly.
B. The EAR is always greater than the APR.
C. The APR on a monthly loan is equal to (1+ monthly interest rate)*12-1
D The APR is the best measure of the actual rate you are paying on a loan.
E. The EAR, rather than the APR, should be used to compare both investment
and loan options.: E. The EAR, rather than the APR, should be used to compare
both investment and loan options.
9. Assume all else, is equal. When comparing saving accounts, you should
select the account that has the:
A. lowest annual percentage rate
