You opened an account with an investment of $11,000. The value of the account quadrupled in 15

QUESTION

QUESTION 1
1.
You opened an account
with an investment of $11,000. The value of the account quadrupled in 15
years. If interest was compounded quarterly, what rate per quarter did
you earn on the account?

A.

1.1510%

B.

2.3374%

C.

1.5376%

D.

1.8479%

E.

1.4545%

F.

1.3165%

G.

1.9441%

H.

1.6640%

6 points
QUESTION 2
1.
Riverhawk Sales, Inc. had
a net income of $15,000 on sales of $100,000 last year. Its balance sheet shows
debt of $20,000 and equity of $70,000. If the total dividend paid was $7,500,
what is its sustainable growth rate?

A.

0.1478

B.

0.2000

C.

0.1077

D.

0.1200

E.

0.1636

F.

0.0963

G.

0.1810

H.

0.1333

6 points
QUESTION 3
1.
ICC, Inc. (ICC) had sales
of $300,000 on which it earned net income of $18,000. Its total debt is $45,000
and total equity is $84,000. Last year, ICC paid dividends of $6,000. If the
total debt ratio remains constant and the company grows at the sustainable
growth rate in the coming year, how much new borrowing will take place?

A.

$12,750

B.

$30,250

C.

$9,882

D.

$25,385

E.

$27,720

F.

$16,200

G.

$7,500

H.

$20,357

6 points
QUESTION 4
1.
The risk premium for an
investment is 3 percent. The inflation premium is 4 percent. If the pure rate
of interest in the market is 4.0 percent, what should be the yield on a risk-free security?
Use exact formulation.

A.

9.20%

B.

9.72%

C.

7.12%

D.

7.64%

E.

6.60%

F.

8.68%

G.

6.08%

H.

8.16%

6 points
QUESTION 5
1.
Fast Street Investment
Company offers you an investment that promises to triple your money in 21
months. Interest is compounded quarterly. What rate per quarter is the
investment promising?

A.

7.6%

B.

6.7%

C.

13.0%

D.

10.5%

E.

6.0%

F.

5.4%

G.

8.8%

H.

17.0%

6 points
QUESTION 6
1.
Bank A pays 8.1 percent
compounded daily on all deposits. What is the effective rate?

A.

8.839%

B.

8.973%

C.

8.668%

D.

8.436%

E.

9.089%

F.

8.192%

G.

8.031%

H.

8.322%

6 points
QUESTION 7
1.
Quick Corporation has
current liabilities of $6,600, inventory of $2,800, and net working capital of
$2,800. What is its quick ratio?

A.

0.9630

B.

0.9833

C.

0.9048

D.

1.0139

E.

1.0256

F.

0.9375

G.

1.0000

H.

1.0357

6 points
QUESTION 8
1.
Cash Coverage, Inc. had net
sales of $500,000 last year, and increased its retained earnings by $25,000 for
the year after paying a dividend of $2 per share on 20,000 outstanding
shares. The tax rate for the company is 40%. The company had cost
of goods sold of $225,000 and its accumulated depreciation increased by
$75,000. What is its cash coverage ratio?

A.

2.50

B.

5.45

C.

3.71

D.

6.00

E.

4.31

F.

3.00

G.

8.50

H.

4.67

6 points
QUESTION 9
1.
Upon graduation from
college in two years you plan to go for an extravagant European vacation. Your
parents will give you a graduation gift of $3,600 to help with the cost of the
vacation. You have $2,000 available at present, which you plan to deposit
into an account that pays 11.5 percent interest compounded quarterly.
What is the maximum amount you will be able to spend on your vacation?

A.

$5,437

B.

$5,885

C.

$5,661

D.

$6,109

E.

$6,230

F.

$5,553

G.

$6,004

H.

$5,777

6 points
QUESTION 10
1.
You are 20 years old and
plan to retire with $1,000,000. You have $37,500 available for investment
now. You deposit this into an account that pays 10.75% interest
compounded annually? How old will you be when the account has the target
amount? (Answers are rounded.)

A.

65

B.

57

C.

54

D.

59

E.

63

F.

52

G.

61

H.

55

6 points
QUESTION 11
1.
UML Inc. had an EBIT of
73,000, depreciation expense of 8,500, and paid 19,500 in taxes. Its interest
costs were $9,800; its long-term borrowing reduced by $4,000; it raised $6,000
in new equity; and paid $12,000 in dividends. If the net capital spending was
$31,000, what was the change in net working capital?

A.

10,900

B.

11,200

C.

10,300

D.

10,000

E.

10,600

F.

9,700

G.

11,500

H.

9,400

6 points
QUESTION 12
1.
The Bank of Loans uses
the following rating scheme to classify the riskiness of its customers.

Risk
Class

Risk
Premium (%)

Prime

.05

High
grade

1.0

Upper
medium grade

1.5

Lower
medium grade

2.0

Speculative:
Non-investment grade

4.0

Speculative:
Highly

6.0

Substantial
risks

9.0

Extremely
speculative

12.0

2.

The bank’s pure rate of interest is 3.5% and the inflation premium is 3%.

What rate would the bank offer a customer who is in the lower medium grade risk
class?

A.

9.79%

B.

6.64%

C.

7.69%

D.

8.74%

E.

7.16%

F.

10.31%

G.

8.21%

H.

9.26%

6 points
QUESTION 13
1.
Lowell Growth, Inc. has
total debt ratio of 0.48 and a dividend payout ratio of 40 percent. If its
profit margin is 10 percent and total asset turnover is 4, what is its return
on assets ratio (ROA)?

A.

20.6%

B.

17.5%

C.

35.6%

D.

40.0%

E.

31.5%

F.

24.0%

G.

14.6%

H.

27.6%

6 points
QUESTION 14
1.
You just won the
lottery! You wish to put away enough money so that you can withdraw
$6,000 per month for 25 years. You can earn 11.4% rate on any funds you
deposit. How much will you have to deposit now to meet your goal? (Note:
Withdrawal frequency matches compounding frequency.)

A.

$480,100

B.

$829,659

C.

$771,203

D.

$886,890

E.

$712,179

F.

$653,143

G.

$594,551

H.

$536,773

6 points
QUESTION 15
1.
You purchased a new car
for $32,000 by making a $10,000 down payment and borrowing the remainder at an
annual rate of 8.5 percent for five years. What is your monthly payment?

A.

$475

B.

$451

C.

$406

D.

$498

E.

$522

F.

$546

G.

$570

H.

$428

6 points
QUESTION 16
1.
Note: This is a
challenging question. Please attempt it in the end.
Ms.
Ieda Silva plans to retire in 29 years and expects to live for 20 years after
retirement. She is preparing a savings plan to meet the following objectives.
First, after retirement she would like to be able to withdraw $22,000 per
month. The first withdrawal will occur at the end of the first month after
retirement. Second, she would like to leave her son an inheritance of $500,000
when she passes on. Finally, she would like to set up a fund that will pay
$6,000 per month forever to her favorite charity after she passes on. These
payments to the charity will start one month after she passes on. All monies
can earn 10 percent annual rate compounded monthly. How much will she have to
save per month to meet these objectives? She wishes to make the first deposit a
month from now and the last deposit on the day she retires.

A.

$983.24

B.

$430.71

C.

$1,014.02

D.

$1,105.11

E.

$1,550.51

F.

$603.38

G.

$1,306.52

H.

$1,202.17

6 points
QUESTION 17
1.
Breads ‘R Us had sales of
$65,000 last year. Their total costs were $24,000, and the depreciation
charge was $3,000. They have 1,720 shares outstanding and paid dividend
of $3.40 per share after keeping 70 percent of the net income as retained
earnings. If they paid 40 percent in taxes, how much was the interest
expense?

A.

4,111

B.

1,911

C.

3,467

D.

1,000

E.

5,133

F.

2,733

G.

5,511

H.

4,667

 

ANSWER:

REQUEST HELP FROM A TUTOR