1. Which of the following are capital structure concerns?
I. how to obtain short-term financing
II. the company's financing mix
III. the cost of funds
IV. how and where to raise money
I and II
I, II and III
II, III and IV
I, III and IV
All of the above
Question 2. Book values are different from market values because:
Book values reflect the value of the asset based on generally-accepted accounting principles.
Book values are used in the company s balance sheet.
Book values do not reflect the amount someone is willing to pay today for an asset.
All of the above
None of the above
Question 3. Use the following tax table to answer this question:
|
Taxable Income
|
Tax Rate
|
|
$0-
|
$50,000
|
15%
|
|
$50,001-
|
75,000
|
25
|
|
$75,001-
|
100,000
|
34
|
|
$100,001-
|
335,000
|
39
|
|
$335,001-
|
10,000,000
|
34
|
John has taxable income of $389,745. What is John s average tax rate?
33%
34%
36%
37%
38%
Question 4. Regional Bank offers you an APR of 19 percent compounded semiannually, and Local Bank offers you an EAR of 19.50 percent for a new automobile loan. You should choose ______________ because its _______ is lower.
Regional Bank, APR
Local Bank, EAR
Regional Bank, EAR
Local Bank, APR
Question 5. You deposited $11,000 in your bank account today. Which of the following will decrease the future value of your deposit, assuming that all interest is reinvested? Assume the interest rate is a positive value. Select all that apply:
a decrease in the interest rate
increasing the initial amount of your deposit
increasing the frequency of the interest payments
decreasing the length of the investment period
Question 6. Amy needs to save $20,000 in cash to buy a new car five years from today. She expects to earn 6.5 percent, compounded annually, on her savings. How much does she need to deposit today, if this is the only money she saves for this purpose?
$12,468.07
$12,502.14
$14,597.62
$17,044.32
$17,129.01
Question 7. Paper Pro needed a new store. The company spent $65,000 to refurbish an old shop and create the current facility. The firm borrowed 75 percent of the refurbishment cost at eight percent interest for 11 years. What is the amount of each monthly payment?
$91.05
$284.13
$556.50
$682.87
$731.60
Question 8. John borrowed $5,500 four years ago at an annual interest rate of 10 percent. The loan term is seven years. Since he borrowed the money, Sonny has been making annual payments of $550 to the bank. Which type of loan does John have?
interest-only
pure discount
compounded
amortized
complex
Question 9. Fanta Cola has $1,000 par value bonds outstanding at 12 percent interest. The bonds mature in 25 years. What is the current price of the bond, if the YTM is 11 percent? Assume annual payments.
$1080
$1085
$925
$1000
Question 10. The market where one shareholder sells shares to another shareholder is called the _____ market.
primary
main
secondary
principal
dealer
Question 11. Which one of the following statements concerning financial leverage is correct?
Financial leverage increases profits and decreases losses.
Financial leverage has no effect on a firm's return on equity.
Financial leverage, refers to the use of common stock.
Financial leverage magnifies both profits and losses.
Increasing financial leverage will always increase the earnings per share.
Question 12. What is the approximate yield to maturity for a seven-year bond that pays 11 percent interest on a $1000 face value annually if the bond sells for $952?
10.5%
10.6%
11.5%
12.1%
Question 13. Which of the following is true regarding bonds?
Most bonds do not carry default risk.
Municipal bonds are free of default risk.
Bonds are not sensitive to changes in the interest rates.
Moody s and Standard and Poor s provide information regarding a bond s interest rate risk.
None of the above is true
Question 14. Which one of the following bonds is the most sensitive to interest rate movements
zero-coupon, five year
seven percent annual coupon, five year
zero-coupon, 10 year
five percent semi-annual coupon, 10 year
five percent annual coupon, 10 year
Question 15. A sinking fund is an account managed by a bond trustee for the sole purpose of:
paying interest payments on a semi-annual basis.
redeeming bonds early.
repaying the face value at maturity.
paying the expenses required to reissue outstanding bonds.
paying the "balloon payment" at maturity.