COMM 309: Corporate Finance
MULTIPLE CHOICE QUESTIONS
1. Ten years ago you purchased a house for $150,000. You have just sold the house for
$115,000. The annual rate of return you have earned on this property is closest to:
A) -2.62%
B) -2.33%
C) 2.33% pv 150000 N 1U
D) 2.69%
15000
CPTF 4 2.62
E) 6.87% FV
2. Franklin wishes to have $10 million in his retirement savings plan in 25 years. His bank is
offering him an investment that promises a return of 8% compounded monthly. Franklin
wishes to deposit money every six months and plans to make his first deposit
immediately. Franklin’s semi-annual deposit is closest to:
A) $61,643
FV 10M CPTPMT 61648
B) $62,983
Ily 4,67
C) $64,151
9 51
D) $65,502 N 50 21 4
EAR 1 8.3 ESR 1 0.083
3. You are choosing between investments offered by two different banks. One promises a
return of 10% for three years using simple interest while the other offers a return of 10% for
three years using compound interest. You should:
A) Choose the simple interest option because both have the same basic interest rate.
B) Choose the compound interest option because it provides a higher return.
C) Choose the compound interest option only if the compounding is for monthly periods.
D) Choose the simple interest option only if compounding occurs more than once a year.
E) Choose the compound interest option only if you are investing less than $5000.
4. Which of the following statements is (are) true concerning the present value of a single
sum?
I. The higher the discount rate the higher the present value.
II. The longer the time period the higher the present value.
III. The larger the future value the larger the present value.
IV. The larger the present value factor the larger the present value.
A) IV only
B) I and IV only
C) III and IV only
D) I, III, and IV only
E) I, II, III, and IV
© Copyright – 2024 – Checkmark Tutorials Inc. – All Rights Reserved.
, COMM 309: Corporate Finance
5. An account was opened with $1000 ten years ago. Today the account balance is $1500. If
the account paid interest compounded annually, how much interest on interest was
earned?
A) $86.20
B) $93.10 FVzl500 CPTIly 4.138
C) $102.39
D) $130.28 PV 1000 1000 0.04138 10 413.80
E) $500.00
NIO 500 413.80 86.20
6. Suppose you read that a bond with a face value of $1000 and a coupon of $80 per year
has a yield to maturity of exactly 8%. How many years remain until maturity?
I. Greater than 20 years
II. Greater than 10 years but less than 20
III. Less than 10 years
A) I only
B) II only since CR YTM they are so at par
C) III only
D) I, II, or III may be correct they could mature at anytime
E) None of the above
7. JM Inc. just issued 10-year 8% coupon bonds at par. Outstanding HE Corp. bonds which
have a maturity of 10 years sell at a premium to par and are viewed by investors as having
the same risk as the JM bonds. Therefore it must be true that:
A) The coupon rate on the HE bonds is equal to that on the JM bonds.
B) The coupon rate on the HE bonds is higher than that on the JM bonds.
same YTM
C) The coupon payment on the HE bonds is lower than that on the JM bonds.
D) The yield on HE bonds is higher than the yield on JM bonds. JM CR 87
E) The HE bonds pay coupons more often than twice a year.
HE must be higher
8. Marge Cosmetics just announced that earnings for the first quarter of the current year
grew at an annualized rate of 3% well above the rate for the same quarter the previous
year. Upon the announcement, the stock price did not change. (The market in general
was also unchanged). Which of the following is most likely correct?
A) Marge’s price didn't change since the market was surprised by the announcement.
B) Interest rates in the economy must have increased.
C) Marge’s price didn't change because investors likely anticipated the news release.
D) Marge’s price didn't change because the market in general was unchanged.
E) Marge must have a beta coefficient equal to 1.
© Copyright – 2024 – Checkmark Tutorials Inc. – All Rights Reserved.
MULTIPLE CHOICE QUESTIONS
1. Ten years ago you purchased a house for $150,000. You have just sold the house for
$115,000. The annual rate of return you have earned on this property is closest to:
A) -2.62%
B) -2.33%
C) 2.33% pv 150000 N 1U
D) 2.69%
15000
CPTF 4 2.62
E) 6.87% FV
2. Franklin wishes to have $10 million in his retirement savings plan in 25 years. His bank is
offering him an investment that promises a return of 8% compounded monthly. Franklin
wishes to deposit money every six months and plans to make his first deposit
immediately. Franklin’s semi-annual deposit is closest to:
A) $61,643
FV 10M CPTPMT 61648
B) $62,983
Ily 4,67
C) $64,151
9 51
D) $65,502 N 50 21 4
EAR 1 8.3 ESR 1 0.083
3. You are choosing between investments offered by two different banks. One promises a
return of 10% for three years using simple interest while the other offers a return of 10% for
three years using compound interest. You should:
A) Choose the simple interest option because both have the same basic interest rate.
B) Choose the compound interest option because it provides a higher return.
C) Choose the compound interest option only if the compounding is for monthly periods.
D) Choose the simple interest option only if compounding occurs more than once a year.
E) Choose the compound interest option only if you are investing less than $5000.
4. Which of the following statements is (are) true concerning the present value of a single
sum?
I. The higher the discount rate the higher the present value.
II. The longer the time period the higher the present value.
III. The larger the future value the larger the present value.
IV. The larger the present value factor the larger the present value.
A) IV only
B) I and IV only
C) III and IV only
D) I, III, and IV only
E) I, II, III, and IV
© Copyright – 2024 – Checkmark Tutorials Inc. – All Rights Reserved.
, COMM 309: Corporate Finance
5. An account was opened with $1000 ten years ago. Today the account balance is $1500. If
the account paid interest compounded annually, how much interest on interest was
earned?
A) $86.20
B) $93.10 FVzl500 CPTIly 4.138
C) $102.39
D) $130.28 PV 1000 1000 0.04138 10 413.80
E) $500.00
NIO 500 413.80 86.20
6. Suppose you read that a bond with a face value of $1000 and a coupon of $80 per year
has a yield to maturity of exactly 8%. How many years remain until maturity?
I. Greater than 20 years
II. Greater than 10 years but less than 20
III. Less than 10 years
A) I only
B) II only since CR YTM they are so at par
C) III only
D) I, II, or III may be correct they could mature at anytime
E) None of the above
7. JM Inc. just issued 10-year 8% coupon bonds at par. Outstanding HE Corp. bonds which
have a maturity of 10 years sell at a premium to par and are viewed by investors as having
the same risk as the JM bonds. Therefore it must be true that:
A) The coupon rate on the HE bonds is equal to that on the JM bonds.
B) The coupon rate on the HE bonds is higher than that on the JM bonds.
same YTM
C) The coupon payment on the HE bonds is lower than that on the JM bonds.
D) The yield on HE bonds is higher than the yield on JM bonds. JM CR 87
E) The HE bonds pay coupons more often than twice a year.
HE must be higher
8. Marge Cosmetics just announced that earnings for the first quarter of the current year
grew at an annualized rate of 3% well above the rate for the same quarter the previous
year. Upon the announcement, the stock price did not change. (The market in general
was also unchanged). Which of the following is most likely correct?
A) Marge’s price didn't change since the market was surprised by the announcement.
B) Interest rates in the economy must have increased.
C) Marge’s price didn't change because investors likely anticipated the news release.
D) Marge’s price didn't change because the market in general was unchanged.
E) Marge must have a beta coefficient equal to 1.
© Copyright – 2024 – Checkmark Tutorials Inc. – All Rights Reserved.
