FIN 3403 UCF - Final Exam Practice Questions
With Correct Answers
What is the required monthly payment on a $530,000.00 mortgage. Assume a
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standard mortgage (360 months) with monthly payments. Use a nominal rate
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(monthly compounding) of 6.00%. - CORRECT ANSWER✔✔-$3,177
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You currently have $3,000.00 in an account and plan on depositing $2,500.00 into
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|the account each year, starting in 1 year. If the account earns an annual effective
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interest rate of 6.70%, how much will be in the account (what is the future value)
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in 5 years, just after making your final deposit? - CORRECT ANSWER✔✔-$18,440
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What is the present value of a perpetuity that pays you annual, end-of-year
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payments of $950.00? Use a nominal rate (monthly compounding) of 7.50%. -
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CORRECT ANSWER✔✔-$12,237 |
Consider a standard mortgage (360 months) with monthly payments and a
| | | | | | | | | | |
nominal rate (monthly compounding) of 6.70%. What portion of the payments
| | | | | | | | | | |
during the first 29 months goes toward principal? - CORRECT ANSWER✔✔-
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14.58%
A perpetual bond with a par value of $1,000.00 and a coupon rate of 7.75% has a
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current market value of $900.00. What is its yield to maturity? - CORRECT
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ANSWER✔✔-8.61%
, What is the price of a perpetual bond with a par value of $1,000.00 and a coupon
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rate of 7.25% (semiannual coupon)? The bond has a nominal yield to maturity of
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6.90%. - CORRECT ANSWER✔✔-$1,050
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Stock in Simons Industries is currently selling for $79.00. It just paid its annual
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dividend of $2.00, which have consistently grown at a rate of 2.90%. What is the
| | | | | | | | | | | | | | |
expected return of this stock? - CORRECT ANSWER✔✔-5.51%
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Your broker has recommended that you purchase stock in National Bank & Trust,
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Inc. National Bank & Trust recently paid its annual dividend ($19.00). Dividends
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have consistently grown at a rate of 2.30%. Analysts estimate that the stock has a
| | | | | | | | | | | | | | |
beta of 1.22. The current risk-free rate is 2.10% and the market return (RM) is
| | | | | | | | | | | | | | |
10.60%. Assuming that CAPM holds, what is the intrinsic value of this stock? -
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CORRECT ANSWER✔✔-$191.12 |
Connie Banko Swimwear recently issued $75.00 par-value preferred stock that
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pays a 7.00% dividend rate per year. The stock has a beta of 1.09, and the current
| | | | | | | | | | | | | | | |
risk-free rate is 2.40% and the market return (RM) is 11.80%. Assuming that
| | | | | | | | | | | | | |
CAPM holds, what is the intrinsic value of this preferred stock? - CORRECT
| | | | | | | | | | | | |
ANSWER✔✔-$41.52
By purchasing training software for $5,500.00, you can eliminate other training
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costs of $3,425.00 each year for the next 10 years. What is the profitability index
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of the software? Use a discount rate of 10.60%. - CORRECT ANSWER✔✔-3.73
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You have purchased a canning machine for $6,500.00. You expect the machine to
| | | | | | | | | | | | |
save your company $1,425.00 each year for the next 10 years. What is the IRR of
| | | | | | | | | | | | | | | |
the machine? - CORRECT ANSWER✔✔-17.58%
| | | |
With Correct Answers
What is the required monthly payment on a $530,000.00 mortgage. Assume a
| | | | | | | | | | | |
standard mortgage (360 months) with monthly payments. Use a nominal rate
| | | | | | | | | | |
(monthly compounding) of 6.00%. - CORRECT ANSWER✔✔-$3,177
| | | | | |
You currently have $3,000.00 in an account and plan on depositing $2,500.00 into
| | | | | | | | | | | |
|the account each year, starting in 1 year. If the account earns an annual effective
| | | | | | | | | | | | | | |
interest rate of 6.70%, how much will be in the account (what is the future value)
| | | | | | | | | | | | | | | |
in 5 years, just after making your final deposit? - CORRECT ANSWER✔✔-$18,440
| | | | | | | | | | |
What is the present value of a perpetuity that pays you annual, end-of-year
| | | | | | | | | | | | |
payments of $950.00? Use a nominal rate (monthly compounding) of 7.50%. -
| | | | | | | | | | | |
CORRECT ANSWER✔✔-$12,237 |
Consider a standard mortgage (360 months) with monthly payments and a
| | | | | | | | | | |
nominal rate (monthly compounding) of 6.70%. What portion of the payments
| | | | | | | | | | |
during the first 29 months goes toward principal? - CORRECT ANSWER✔✔-
| | | | | | | | | |
14.58%
A perpetual bond with a par value of $1,000.00 and a coupon rate of 7.75% has a
| | | | | | | | | | | | | | | | |
current market value of $900.00. What is its yield to maturity? - CORRECT
| | | | | | | | | | | | |
ANSWER✔✔-8.61%
, What is the price of a perpetual bond with a par value of $1,000.00 and a coupon
| | | | | | | | | | | | | | | |
rate of 7.25% (semiannual coupon)? The bond has a nominal yield to maturity of
| | | | | | | | | | | | | | |
6.90%. - CORRECT ANSWER✔✔-$1,050
| | |
Stock in Simons Industries is currently selling for $79.00. It just paid its annual
| | | | | | | | | | | | | |
dividend of $2.00, which have consistently grown at a rate of 2.90%. What is the
| | | | | | | | | | | | | | |
expected return of this stock? - CORRECT ANSWER✔✔-5.51%
| | | | | | |
Your broker has recommended that you purchase stock in National Bank & Trust,
| | | | | | | | | | | | |
Inc. National Bank & Trust recently paid its annual dividend ($19.00). Dividends
| | | | | | | | | | | |
have consistently grown at a rate of 2.30%. Analysts estimate that the stock has a
| | | | | | | | | | | | | | |
beta of 1.22. The current risk-free rate is 2.10% and the market return (RM) is
| | | | | | | | | | | | | | |
10.60%. Assuming that CAPM holds, what is the intrinsic value of this stock? -
| | | | | | | | | | | | | |
CORRECT ANSWER✔✔-$191.12 |
Connie Banko Swimwear recently issued $75.00 par-value preferred stock that
| | | | | | | | | |
pays a 7.00% dividend rate per year. The stock has a beta of 1.09, and the current
| | | | | | | | | | | | | | | |
risk-free rate is 2.40% and the market return (RM) is 11.80%. Assuming that
| | | | | | | | | | | | | |
CAPM holds, what is the intrinsic value of this preferred stock? - CORRECT
| | | | | | | | | | | | |
ANSWER✔✔-$41.52
By purchasing training software for $5,500.00, you can eliminate other training
| | | | | | | | | | |
costs of $3,425.00 each year for the next 10 years. What is the profitability index
| | | | | | | | | | | | | | |
of the software? Use a discount rate of 10.60%. - CORRECT ANSWER✔✔-3.73
| | | | | | | | | | |
You have purchased a canning machine for $6,500.00. You expect the machine to
| | | | | | | | | | | | |
save your company $1,425.00 each year for the next 10 years. What is the IRR of
| | | | | | | | | | | | | | | |
the machine? - CORRECT ANSWER✔✔-17.58%
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