FNAN 522 EXAM 1 QUESTIONS & ANSWERS
A company issued debt that did not grant the bondholders the ability to seize the
company's assets to settle the obligation. This debt can be traded on a public exchange.
Which of the following best describes this debt? - Answer -Public, unsecured debt.
Which of the following is NOT a cash equivalent? - Answer -A government bond that
matures in four months.
Which of the following occurred during the financial crisis of 2007-2008? - Answer -All
of these answers
Which of the following statements regarding shareholder and market value is correct? -
Answer -The idea of maximizing market value is related to the idea of maximizing
shareholder value.
How is finance used in organizations? - Answer -All of these answers.
Which of the following terms describes the protection of personal assets stemming from
the corporate structure? - Answer -limited liability
Which of the following is a factor that contributes to the conflict of interest between a
company's bondholders and its shareholders? - Answer -All of these answers
Which of the following is a legal characteristic of a general partnership? - Answer -
There must be at least two business owners.
Which of the following is a type of financial market? - Answer -All of these answers
Which of the following is an accurate characteristic of a sole proprietorship? - Answer -
The owner is personally liable for the business's debt and obligations.
A company issues a bond with the provision that it may pay off the debt early. This bond
is subject to which type of risk? - Answer -Prepayment risk.
What will $247,000 grow to be in 9 years if it is invested today in an account with an
annual interest rate of 11%? - Answer -631,835.12
Approximately how many years will it take for $136,000 to grow to be $468,000 if it is
invested in an account with an annual interest rate of 8%? Choose the closest answer. -
Answer -16 years.
At what annual interest rate must $137,000 be invested so that it will grow to be
$475,000 in 14 years? Choose the closest rate. - Answer -9.29%
, If you wish to accumulate $197,000 in 5 years, how much must you deposit today in an
account that pays a quoted annual interest rate of 13% with semi-annual compounding
of interest? Round to the nearest dollar. - Answer -$104,947
What will $153,000 grow to be in 13 years if it is invested today in an account with a
quoted annual interest rate of 10% with monthly compounding of interest? Round to the
nearest dollar. - Answer -$558,386
You are offered an investment with a quoted annual interest rate of 13% with quarterly
compounding of interest. What is your effective annual interest rate? - Answer -13.65%
You are offered an annuity that will pay $24,000 per year for 11 years (the first payment
will occur one year from today). If you feel that the appropriate discount rate is 13%,
what is the annuity worth to you today? Round to the nearest dollar. - Answer -
$136,487
You plan to buy a car that has a total "drive-out" cost of $25,700. You will make a down
payment of $3,598. The remainder of the car's cost will be financed over a period of 5
years. You will repay the loan by making equal monthly payments. Your quoted annual
interest rate is 8% with monthly compounding of interest. (The first payment will be due
one month after the purchase date.) What will your monthly payment be? - Answer -
$448.15
If you deposit $16,000 per year for 12 years (each deposit is made at the end of each
year) in an account that pays an annual interest rate of 14%, what will your account be
worth at the end of 12 years? Round to the nearest dollar. - Answer -$436,332
John and Peggy recently bought a house. They financed the house with a $125,000,
30-year mortgage with a nominal annual interest rate of 7 percent with monthly
compounding. Mortgage payments are made at the end of each month. What is the
monthly mortgage payment? - Answer -$831.63
By increasing the number of compounding periods in a year, while holding the stated
annual interest rate constant, you will... - Answer -increase the effective annual rate.
If you wish to accumulate $140,000 in 13 years, how much must you deposit today in an
account that pays an annual interest rate of 14%? - Answer -$25,489.71
A portfolio has $70,000 of bonds and $30,000 of stock. The bonds are 80% likely to
have a 10% return and 20% likely to have a 0% return. The stock is 50% likely to have a
20% return and 50% likely to have a 10% loss. What is the expected return? - Answer -
7.10%
You are planning for retirement 34 years from now. You plan to invest $575 at the end
of the month for the following 34 years (assume all cash flows occur at the end of each
month). If you believe you will earn an annual percentage rate of return of 9.7%, what
A company issued debt that did not grant the bondholders the ability to seize the
company's assets to settle the obligation. This debt can be traded on a public exchange.
Which of the following best describes this debt? - Answer -Public, unsecured debt.
Which of the following is NOT a cash equivalent? - Answer -A government bond that
matures in four months.
Which of the following occurred during the financial crisis of 2007-2008? - Answer -All
of these answers
Which of the following statements regarding shareholder and market value is correct? -
Answer -The idea of maximizing market value is related to the idea of maximizing
shareholder value.
How is finance used in organizations? - Answer -All of these answers.
Which of the following terms describes the protection of personal assets stemming from
the corporate structure? - Answer -limited liability
Which of the following is a factor that contributes to the conflict of interest between a
company's bondholders and its shareholders? - Answer -All of these answers
Which of the following is a legal characteristic of a general partnership? - Answer -
There must be at least two business owners.
Which of the following is a type of financial market? - Answer -All of these answers
Which of the following is an accurate characteristic of a sole proprietorship? - Answer -
The owner is personally liable for the business's debt and obligations.
A company issues a bond with the provision that it may pay off the debt early. This bond
is subject to which type of risk? - Answer -Prepayment risk.
What will $247,000 grow to be in 9 years if it is invested today in an account with an
annual interest rate of 11%? - Answer -631,835.12
Approximately how many years will it take for $136,000 to grow to be $468,000 if it is
invested in an account with an annual interest rate of 8%? Choose the closest answer. -
Answer -16 years.
At what annual interest rate must $137,000 be invested so that it will grow to be
$475,000 in 14 years? Choose the closest rate. - Answer -9.29%
, If you wish to accumulate $197,000 in 5 years, how much must you deposit today in an
account that pays a quoted annual interest rate of 13% with semi-annual compounding
of interest? Round to the nearest dollar. - Answer -$104,947
What will $153,000 grow to be in 13 years if it is invested today in an account with a
quoted annual interest rate of 10% with monthly compounding of interest? Round to the
nearest dollar. - Answer -$558,386
You are offered an investment with a quoted annual interest rate of 13% with quarterly
compounding of interest. What is your effective annual interest rate? - Answer -13.65%
You are offered an annuity that will pay $24,000 per year for 11 years (the first payment
will occur one year from today). If you feel that the appropriate discount rate is 13%,
what is the annuity worth to you today? Round to the nearest dollar. - Answer -
$136,487
You plan to buy a car that has a total "drive-out" cost of $25,700. You will make a down
payment of $3,598. The remainder of the car's cost will be financed over a period of 5
years. You will repay the loan by making equal monthly payments. Your quoted annual
interest rate is 8% with monthly compounding of interest. (The first payment will be due
one month after the purchase date.) What will your monthly payment be? - Answer -
$448.15
If you deposit $16,000 per year for 12 years (each deposit is made at the end of each
year) in an account that pays an annual interest rate of 14%, what will your account be
worth at the end of 12 years? Round to the nearest dollar. - Answer -$436,332
John and Peggy recently bought a house. They financed the house with a $125,000,
30-year mortgage with a nominal annual interest rate of 7 percent with monthly
compounding. Mortgage payments are made at the end of each month. What is the
monthly mortgage payment? - Answer -$831.63
By increasing the number of compounding periods in a year, while holding the stated
annual interest rate constant, you will... - Answer -increase the effective annual rate.
If you wish to accumulate $140,000 in 13 years, how much must you deposit today in an
account that pays an annual interest rate of 14%? - Answer -$25,489.71
A portfolio has $70,000 of bonds and $30,000 of stock. The bonds are 80% likely to
have a 10% return and 20% likely to have a 0% return. The stock is 50% likely to have a
20% return and 50% likely to have a 10% loss. What is the expected return? - Answer -
7.10%
You are planning for retirement 34 years from now. You plan to invest $575 at the end
of the month for the following 34 years (assume all cash flows occur at the end of each
month). If you believe you will earn an annual percentage rate of return of 9.7%, what
