Huey Looz had an unpaid balance of $200 on his credit account last month. This month he charged $100 and made a payment of $20. Using the previous balance method and an APR of 18%, Huey owes $2.70 interest this month. Indicate whether the statement is true or false ANSWER FALSE
Five years ago Fairfield Farms Inc. issued 20 year semi-annual coupon bonds with a 9% annual coupon rate and a $1,000 face value. If the bonds currently carry a yield to maturity of 6%, what is the current price of a bond? A) $1,346.72 B) $1,294.01 C) $1,344.10 D) $1,291.37 ANSWER B Explanation: […]
Which of the following is NOT a negative attribute of the price-earnings multiple valuation model? A) It implicitly assumes that comparable firms are already fairly pried in the market place. B) Its focus on earnings may be clouded by dubious accounting assumptions. C) It is based on relative market measures rather than book measures. D) […]
The present value of a $100 perpetuity discounted at 5% is $5,000. Indicate whether the statement is true or false ANSWER FALSE
Flyover Airlines Inc issued 20-year, 8% per annum semi-annual coupon bonds at their face value of $1,000. Immediately after issue a major disaster befell the airline and the yield to maturity on their bonds rose to 15%. per annum. What is the new price of the firm’s bonds? A) $559.20 B) $613.22 C) $1,000 D) […]
Which of the following is NOT a positive attribute of the price-earnings multiple valuation model? A) It is easy to use. B) It implicitly assumes that comparable firms are already fairly pried in the market place. C) It is forward-looking. D) It is based on relative market measures rather than book measures. ANSWER […]
From the saver’s point of view, the best method of computing interest is the day of deposit day of withdrawal method. Indicate whether the statement is true or false ANSWER TRUE
An open-end fund differs from a closed-end fund in that the open-end fund does not limit the kinds of securities it buys. Indicate whether the statement is true or false ANSWER FALSE
Credited years of service A) must equal the calendar years of employment. B) can exceed the calendar years of employment. C) will include only those years in which the hours worked exceed a minimum in the plan description. D) will include only those in which job-related performance was satisfactory. ANSWER C
How does opportunity cost affect an investor’s required rate of return? What will be an ideal response? ANSWER An investor’s required rate of return can be defined as the minimum rate of return necessary to attract an investor to purchase or hold a security. This definition considers the investor’s opportunity cost of funds […]