2026 UPDATED QUESTIONS DOWNLOAD
FINC 381 UTK Exam 1 Mastery Bank | Financial Management
(Roark Edition) | Graded A+ 2026
1. What is the primary purpose of financial management?
A. Maximize employee satisfaction
B. Maximize shareholder wealth
C. Minimize taxes
D. Increase market share
Answer: B
Rationale: Financial management focuses on increasing shareholder value.
2. Which of the following represents a cash outflow?
A. Depreciation
B. Revenue
C. Operating expense
D. Accounts receivable
Answer: C
Rationale: Operating expenses require cash payments.
3. Time Value of Money (TVM) states that:
A. Money today is worth more than money in the future
B. Future money is always more valuable
C. Interest rates do not matter
D. Inflation increases value
Answer: A
Rationale: Money can earn interest over time.
4. Future Value (FV) formula is:
,2026 UPDATED QUESTIONS DOWNLOAD
A. PV / (1 + r)^t
B. PV(1 + r)^t
C. PV × r
D. (1 + r) / PV
Answer: B
Rationale: FV grows based on interest over time.
5. Present Value (PV) formula is:
A. FV(1 + r)^t
B. FV / (1 + r)^t
C. FV × r
D. (1 + r) / FV
Answer: B
Rationale: PV discounts future cash flows.
6. If you invest $1,000 at 5% for 2 years, FV = ?
A. $1,100
B. $1,102.50
C. $1,050
D. $1,200
Answer: B
Calculation:
FV=1000(1.05)2=1000×1.1025=$1,102.50FV = 1000(1.05)^2 = 1000 \times 1.1025 =
\$1,102.50FV=1000(1.05)2=1000×1.1025=$1,102.50
7. An annuity is:
A. A single cash flow
B. A series of equal payments
C. A random payment
D. A stock dividend
Answer: B
Rationale: Annuities involve equal periodic payments.
,2026 UPDATED QUESTIONS DOWNLOAD
8. A perpetuity is:
A. A limited series of payments
B. Payments forever
C. A loan
D. A bond
Answer: B
Rationale: Perpetuities have infinite payments.
9. Perpetuity formula:
A. PMT / r
B. PMT × r
C. PV × r
D. FV / r
Answer: A
Rationale: PV of perpetuity = payment ÷ rate.
10. If payment = $100 and rate = 5%, PV = ?
A. $2,000
B. $1,500
C. $2,500
D. $1,000
Answer: A
PV=1000.05=2000PV = \frac{100}{0.05} = 2000PV=0.05100=2000
11. APR vs. EAR:
A. APR includes compounding
B. EAR reflects compounding
C. They are always equal
D. Neither matters
, 2026 UPDATED QUESTIONS DOWNLOAD
Answer: B
Rationale: EAR accounts for compounding.
12. If APR = 12% monthly, EAR = ?
A. 12%
B. 12.68%
C. 10%
D. 14%
Answer: B
EAR=(1+0.12/12)12−1=12.68%EAR = (1 + 0.12/12)^{12} - 1 = 12.68\%EAR=(1+0.12/12)12−1=12.68%
13. Risk and return principle:
A. Higher risk → higher return
B. Higher risk → lower return
C. No relationship
D. Risk is irrelevant
Answer: A
Rationale: Investors require compensation for risk.
14. Diversification reduces:
A. Systematic risk
B. Unsystematic risk
C. Market risk
D. Interest risk
Answer: B
Rationale: Diversification reduces company-specific risk.
15. Systematic risk is:
A. Diversifiable
B. Market-wide risk
FINC 381 UTK Exam 1 Mastery Bank | Financial Management
(Roark Edition) | Graded A+ 2026
1. What is the primary purpose of financial management?
A. Maximize employee satisfaction
B. Maximize shareholder wealth
C. Minimize taxes
D. Increase market share
Answer: B
Rationale: Financial management focuses on increasing shareholder value.
2. Which of the following represents a cash outflow?
A. Depreciation
B. Revenue
C. Operating expense
D. Accounts receivable
Answer: C
Rationale: Operating expenses require cash payments.
3. Time Value of Money (TVM) states that:
A. Money today is worth more than money in the future
B. Future money is always more valuable
C. Interest rates do not matter
D. Inflation increases value
Answer: A
Rationale: Money can earn interest over time.
4. Future Value (FV) formula is:
,2026 UPDATED QUESTIONS DOWNLOAD
A. PV / (1 + r)^t
B. PV(1 + r)^t
C. PV × r
D. (1 + r) / PV
Answer: B
Rationale: FV grows based on interest over time.
5. Present Value (PV) formula is:
A. FV(1 + r)^t
B. FV / (1 + r)^t
C. FV × r
D. (1 + r) / FV
Answer: B
Rationale: PV discounts future cash flows.
6. If you invest $1,000 at 5% for 2 years, FV = ?
A. $1,100
B. $1,102.50
C. $1,050
D. $1,200
Answer: B
Calculation:
FV=1000(1.05)2=1000×1.1025=$1,102.50FV = 1000(1.05)^2 = 1000 \times 1.1025 =
\$1,102.50FV=1000(1.05)2=1000×1.1025=$1,102.50
7. An annuity is:
A. A single cash flow
B. A series of equal payments
C. A random payment
D. A stock dividend
Answer: B
Rationale: Annuities involve equal periodic payments.
,2026 UPDATED QUESTIONS DOWNLOAD
8. A perpetuity is:
A. A limited series of payments
B. Payments forever
C. A loan
D. A bond
Answer: B
Rationale: Perpetuities have infinite payments.
9. Perpetuity formula:
A. PMT / r
B. PMT × r
C. PV × r
D. FV / r
Answer: A
Rationale: PV of perpetuity = payment ÷ rate.
10. If payment = $100 and rate = 5%, PV = ?
A. $2,000
B. $1,500
C. $2,500
D. $1,000
Answer: A
PV=1000.05=2000PV = \frac{100}{0.05} = 2000PV=0.05100=2000
11. APR vs. EAR:
A. APR includes compounding
B. EAR reflects compounding
C. They are always equal
D. Neither matters
, 2026 UPDATED QUESTIONS DOWNLOAD
Answer: B
Rationale: EAR accounts for compounding.
12. If APR = 12% monthly, EAR = ?
A. 12%
B. 12.68%
C. 10%
D. 14%
Answer: B
EAR=(1+0.12/12)12−1=12.68%EAR = (1 + 0.12/12)^{12} - 1 = 12.68\%EAR=(1+0.12/12)12−1=12.68%
13. Risk and return principle:
A. Higher risk → higher return
B. Higher risk → lower return
C. No relationship
D. Risk is irrelevant
Answer: A
Rationale: Investors require compensation for risk.
14. Diversification reduces:
A. Systematic risk
B. Unsystematic risk
C. Market risk
D. Interest risk
Answer: B
Rationale: Diversification reduces company-specific risk.
15. Systematic risk is:
A. Diversifiable
B. Market-wide risk
