FIN 306 MULTIPLE CHOICE PRACTICE
EXAMINATION 2026 QUESTIONS WITH
ANSWERS GRADED A+
◍ An investment promises a series of $24,000 annual cash flows in each of the
next 8 years. The first cash flow occurs one year from today. What is the
present value of this investment if the discount rate is 8%? Enter your
answer as a positive number rounded to the nearest dollar..
Answer: 137,919
◍ incremental cash flows.
Answer: the difference between a firm's future cash flows from a project and
those without the project
◍ Consider an ordinary annuity with a positive payment and discount rate. All
else equal, what happens to PV if the discount rate increases?a) PV
decreasesb) PV can either increase or decreasec) PV does not changed) PV
increases.
Answer: a) PV decreases
◍ expected return.
Answer: Return on a risky asset expected in the future.
◍ You just entered an advertising agreement to help sell some branded t-shirts.
The other party has promised to give you the following: $4,000 exactly 1
year from today; $5,000 exactly 4 years from today; $8,000 exactly 5 years
from today. If you deposit each payment in an account that earns an annual
rate of 9.1% and make no other deposits or withdrawals, how much money
will you have 14 years from today? Enter your answer as a positive number
rounded to the nearest dollar..
Answer: 41,875
, ◍ On a balance sheet, equity = assets + liabilities..
Answer: False. Assets= Liabilities + Equity.
◍ opportunity cost.
Answer: the most valuable alternative that is given up if a particular
investment is undertaken
◍ diversification.
Answer: Spreading an investment across a number of assets will eliminate
some, but not all, of the risk
◍ A mortgage has an initial balance of $319,000 to be repaid in monthly
installments over the next 30 years and an annualized interest rate of 4.8%.
What is the payoff amount immediately following payment #216? Enter
your final answer as a positive number rounded to the nearest dollar..
Answer: 182,938
◍ Where does a company's stock appear on its balance sheet?a) liabilitiesb)
equityc) long term assetsd) operations.
Answer: b) equity
◍ erosion.
Answer: the cash flows of a new project that come at the expense of a firm's
existing projects
◍ A donor wants to fund annual scholarships of $35,509 per year. The first
scholarship will be awarded 8 years from today and they will continue each
year thereafter. If the university endowment pays an annual interest rate of
5.5%, how much cash must the donor provide today to fully fund the
scholarships? Enter your answer as a positive number rounded to the nearest
dollar..
Answer: 443,822
◍ You buy a lottery ticket and win $317,000. Since you don't need the money,
you decide to simply deposit it all in an account that pays 2.9% interest per
year with annual compounding. If you leave the money invested, how much
EXAMINATION 2026 QUESTIONS WITH
ANSWERS GRADED A+
◍ An investment promises a series of $24,000 annual cash flows in each of the
next 8 years. The first cash flow occurs one year from today. What is the
present value of this investment if the discount rate is 8%? Enter your
answer as a positive number rounded to the nearest dollar..
Answer: 137,919
◍ incremental cash flows.
Answer: the difference between a firm's future cash flows from a project and
those without the project
◍ Consider an ordinary annuity with a positive payment and discount rate. All
else equal, what happens to PV if the discount rate increases?a) PV
decreasesb) PV can either increase or decreasec) PV does not changed) PV
increases.
Answer: a) PV decreases
◍ expected return.
Answer: Return on a risky asset expected in the future.
◍ You just entered an advertising agreement to help sell some branded t-shirts.
The other party has promised to give you the following: $4,000 exactly 1
year from today; $5,000 exactly 4 years from today; $8,000 exactly 5 years
from today. If you deposit each payment in an account that earns an annual
rate of 9.1% and make no other deposits or withdrawals, how much money
will you have 14 years from today? Enter your answer as a positive number
rounded to the nearest dollar..
Answer: 41,875
, ◍ On a balance sheet, equity = assets + liabilities..
Answer: False. Assets= Liabilities + Equity.
◍ opportunity cost.
Answer: the most valuable alternative that is given up if a particular
investment is undertaken
◍ diversification.
Answer: Spreading an investment across a number of assets will eliminate
some, but not all, of the risk
◍ A mortgage has an initial balance of $319,000 to be repaid in monthly
installments over the next 30 years and an annualized interest rate of 4.8%.
What is the payoff amount immediately following payment #216? Enter
your final answer as a positive number rounded to the nearest dollar..
Answer: 182,938
◍ Where does a company's stock appear on its balance sheet?a) liabilitiesb)
equityc) long term assetsd) operations.
Answer: b) equity
◍ erosion.
Answer: the cash flows of a new project that come at the expense of a firm's
existing projects
◍ A donor wants to fund annual scholarships of $35,509 per year. The first
scholarship will be awarded 8 years from today and they will continue each
year thereafter. If the university endowment pays an annual interest rate of
5.5%, how much cash must the donor provide today to fully fund the
scholarships? Enter your answer as a positive number rounded to the nearest
dollar..
Answer: 443,822
◍ You buy a lottery ticket and win $317,000. Since you don't need the money,
you decide to simply deposit it all in an account that pays 2.9% interest per
year with annual compounding. If you leave the money invested, how much
