FIN 305 WEEK 7 FINAL PART A PRACTICE
EXAMINATION 2026 QUESTIONS WITH
ANSWERS GRADED A+
◍ John can afford to pay $365 per month for the next 5 years in order to
purchase a new car. The interest rate is 6.3 percent compounded monthly.
What is the most he can afford to pay for a new car today?.
Answer: $18,744.28
◍ ABC Co. will pay a dividend of $4.95, $9.05, $11.90, and $13.65 per share
for each of the next four years, respectively. The company will then close its
doors. If investors require a return of 9.2 percent on the company's stock,
what is the stock price?.
Answer: $30.86
◍ Your employer contributes $65 at the end of each week to your retirement
account. The account will earn a weekly interest rate of .15 percent. How
much will the account be worth when you retire in 30 years?.
Answer: $405,732.24
◍ You want to buy a house that costs $220,000. You will make a down
payment equal to 15 percent of the price of the house and finance the
remainder with a loan that has an APR of 5.23 percent compounded
monthly. If the loan is for 25 years, what are your monthly mortgage
payments?.
Answer: $1,118.39
◍ Eurocurrencies are currencies deposited ________ their home country.
Answer: outside
◍ A bond sells at a premium when its coupon rate is ________ the market rate.
Answer: above
, ◍ Collateralized mortgage obligations are divided into ________.
Answer: tranches
◍ Securitization involves pooling mortgages and selling them as ________.
Answer: securities
◍ An investment had a nominal return of 10.2 percent last year. If the real
return on the investment was only 8.0 percent, what was the inflation rate
for the year?.
Answer: 2.04%
◍ ABC has a bond outstanding with a coupon rate of 3.55 percent and
semiannual payments. The bond matures in 22 years, with a yield to
maturity of 4.11 percent, and a par value of $5,000. What is the market price
of the bond?.
Answer: $4,597.10
◍ Private mortgage insurance is required when down payment is less than
________.
Answer: 20 percent
◍ The common stock of ABC, Inc., sells for $36.23 a share. The stock is
expected to pay a dividend of $2.20 per share next year. Eddie's has
established a pattern of increasing their dividends by 4.3 percent annually
and expects to continue doing so. What is the market rate of return on this
stock?.
Answer: 10.37%
◍ John wants to buy a car that costs $30,250. The interest rate on his loan is
5.61 percent compounded monthly and the loan is for 5 years. What are his
monthly payments?.
Answer: $579.35
◍ If required return rises and growth stays constant, stock price will ________.
Answer: fall
◍ The Gordon Growth Model assumes dividends grow at a ________ rate.
EXAMINATION 2026 QUESTIONS WITH
ANSWERS GRADED A+
◍ John can afford to pay $365 per month for the next 5 years in order to
purchase a new car. The interest rate is 6.3 percent compounded monthly.
What is the most he can afford to pay for a new car today?.
Answer: $18,744.28
◍ ABC Co. will pay a dividend of $4.95, $9.05, $11.90, and $13.65 per share
for each of the next four years, respectively. The company will then close its
doors. If investors require a return of 9.2 percent on the company's stock,
what is the stock price?.
Answer: $30.86
◍ Your employer contributes $65 at the end of each week to your retirement
account. The account will earn a weekly interest rate of .15 percent. How
much will the account be worth when you retire in 30 years?.
Answer: $405,732.24
◍ You want to buy a house that costs $220,000. You will make a down
payment equal to 15 percent of the price of the house and finance the
remainder with a loan that has an APR of 5.23 percent compounded
monthly. If the loan is for 25 years, what are your monthly mortgage
payments?.
Answer: $1,118.39
◍ Eurocurrencies are currencies deposited ________ their home country.
Answer: outside
◍ A bond sells at a premium when its coupon rate is ________ the market rate.
Answer: above
, ◍ Collateralized mortgage obligations are divided into ________.
Answer: tranches
◍ Securitization involves pooling mortgages and selling them as ________.
Answer: securities
◍ An investment had a nominal return of 10.2 percent last year. If the real
return on the investment was only 8.0 percent, what was the inflation rate
for the year?.
Answer: 2.04%
◍ ABC has a bond outstanding with a coupon rate of 3.55 percent and
semiannual payments. The bond matures in 22 years, with a yield to
maturity of 4.11 percent, and a par value of $5,000. What is the market price
of the bond?.
Answer: $4,597.10
◍ Private mortgage insurance is required when down payment is less than
________.
Answer: 20 percent
◍ The common stock of ABC, Inc., sells for $36.23 a share. The stock is
expected to pay a dividend of $2.20 per share next year. Eddie's has
established a pattern of increasing their dividends by 4.3 percent annually
and expects to continue doing so. What is the market rate of return on this
stock?.
Answer: 10.37%
◍ John wants to buy a car that costs $30,250. The interest rate on his loan is
5.61 percent compounded monthly and the loan is for 5 years. What are his
monthly payments?.
Answer: $579.35
◍ If required return rises and growth stays constant, stock price will ________.
Answer: fall
◍ The Gordon Growth Model assumes dividends grow at a ________ rate.
