FINANCE-You opened an account with an investment of $11,000

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

 

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