WLU BU 283 Financial Management I –Learning Catalytics Final Exam 2025 sample actual questions and answers

WLU BU 283 Financial Management I –Learning Catalytics Final Exam 2025 sample actual questions and answers Chapter 1 & 3 1. You invest $100 at the end of year 1. At the end of year 2, you receive $200. Which of the following timelines represents the cash flows just described? A. A B. B C. C 2. An investment costs you $95.238 today and will pay you $100 in 1 year’s time. What is the interest rate (rate of return) on this investment? A. 2% B. 3% C. 4% D. 5% E. 6% FV = PV x (1+i) i = (FV – PV)/PV = (100 – 95.328)/95.328 = 0.05 3. Next year is the 30th anniversary of Humphrey the Camel Beanie Baby. You think it will be worth $1,500 next year. You have a chance to buy it today from a collector. How much will you pay if an alternative (equally risky) investment yields 10%? A. $1,388.89 B. $1,376.15 C. $1,363.64 D. $1,351.35 E. $1,339.29 PV = FV / (1+i) PV = 1500/1.1 = 1,363.64 4. You have $1,000 to invest today. You want to invest it for 35 years. You have two choices: 1) BBB-rated corporate bonds are expected to yield an average of 5%; or 2) biotech stocks are expected to earn a return of 12%. Calculate the future value of each investment. How much bigger is the stock investment relative to the bond investment (i.e., FVstock/FVbonds)? A. 2.7 B. 3.7 C. 5.1 D. 7 E. 9.6 FV = PV * (1+i)n FV = 1000x(1.05)35 = 5,516.02 FV = 1000x(1.12)35 = 52,799.62 FV_stocks/FV_bonds = 52,799.62/ 5,516.02 = 9.6 5. You buy a unit in a mutual fund for $10. After 1 year, the unit’s price rises to $20. The year following, it falls back to $10. See the diagram below and calculate the arithmetic average (garden variety average) return for the 2 years. Then calculate the compound average (geometric average) return. What is the difference between the two? (arithmetic minus geometric) Which is more accurate? A. -25% B. 0%