INTERMEDIATE FINANCIAL MANAGEMENT 14TH
EDITION BY EUGENE BRIGHAM
COMPREHENSIVE EXAM SCRIPT WITH
SOLUTIONS
◉ In calculating the present value of $1,000 to be received 5 years
from today, the discount factor has been calculated to be .7008. What
is the apparent interest rate?
A. 5.43%
B. 7.37%
C. 8.00%
D. 9.50%.
Answer: B. 7.37%
FV = PV(1 + r)t
1 = .7008(1 + r)5
,r = .0737, or 7.37%
◉ Given a set future value, which of the following will contribute to a
lower present value?
A. Higher discount rate
B. Fewer time periods
C. Less frequent discounting
D. Lower discount factor.
Answer: A. Higher discount rate
◉ Cash flows occurring in different periods should not be compared
unless:
A. interest rates are expected to be stable.
B. the flows occur no more than one year from each other.
,C. high rates of interest can be earned on the flows.
D. the flows have been discounted to a common date..
Answer: D. the flows have been discounted to a common date.
◉ What will be the approximate population of the United States, if
its current population of 300 million grows at a compound rate of
2% annually for 25 years?
A. 413 million
B. 430 million
C. 488 million
D. 492 million.
Answer: D. 492 million
FV = PV(1 + r)t
FV = 300 million × (1.02)25
, FV = 492.2 million ≈ 492 million
◉ If the future value of an annuity due is $25,000 and $24,000 is the
future value of an ordinary annuity that is otherwise similar to the
annuity due, what is the implied discount rate?
A. 1.04%
B. 4.17%
C. 5.00%
D. 8.19%.
Answer: B. 4.17%
FVAD = FVOA × (1 + r)
$25,000 = $24,000 × (1 + r)
r =.0417, or 4.17%
◉ A furniture store is offering free credit on purchases over $1,000.
You observe that a big-screen television can be purchased for
nothing down and $4,000 due in one year. The store next door offers
EDITION BY EUGENE BRIGHAM
COMPREHENSIVE EXAM SCRIPT WITH
SOLUTIONS
◉ In calculating the present value of $1,000 to be received 5 years
from today, the discount factor has been calculated to be .7008. What
is the apparent interest rate?
A. 5.43%
B. 7.37%
C. 8.00%
D. 9.50%.
Answer: B. 7.37%
FV = PV(1 + r)t
1 = .7008(1 + r)5
,r = .0737, or 7.37%
◉ Given a set future value, which of the following will contribute to a
lower present value?
A. Higher discount rate
B. Fewer time periods
C. Less frequent discounting
D. Lower discount factor.
Answer: A. Higher discount rate
◉ Cash flows occurring in different periods should not be compared
unless:
A. interest rates are expected to be stable.
B. the flows occur no more than one year from each other.
,C. high rates of interest can be earned on the flows.
D. the flows have been discounted to a common date..
Answer: D. the flows have been discounted to a common date.
◉ What will be the approximate population of the United States, if
its current population of 300 million grows at a compound rate of
2% annually for 25 years?
A. 413 million
B. 430 million
C. 488 million
D. 492 million.
Answer: D. 492 million
FV = PV(1 + r)t
FV = 300 million × (1.02)25
, FV = 492.2 million ≈ 492 million
◉ If the future value of an annuity due is $25,000 and $24,000 is the
future value of an ordinary annuity that is otherwise similar to the
annuity due, what is the implied discount rate?
A. 1.04%
B. 4.17%
C. 5.00%
D. 8.19%.
Answer: B. 4.17%
FVAD = FVOA × (1 + r)
$25,000 = $24,000 × (1 + r)
r =.0417, or 4.17%
◉ A furniture store is offering free credit on purchases over $1,000.
You observe that a big-screen television can be purchased for
nothing down and $4,000 due in one year. The store next door offers
