Which choice has a greater present value if we assume a required rate of return of 10%? 1: A lump sum cash flow today of $248.69, 2: $100 cash flows occurring one, two, and three years from today, or 3: a single cash flow of $331 three years from today. A) Choice 1 B) Choice […]
Date: September 19th, 2020
The date today is January 1, 2010. A one-year security maturing on 1/1/11 yields 3%. A two-year security maturing on 1/1/12 yields 6%. A three-year security maturing on 1/1/13 yields 11%. Calculate the expected annual return on a two-year security beginning 1/1/11 and maturing on 1/1/13. ANSWER $1,000 × (1.11)3 = $1,367.63 at […]
Date: September 19th, 2020
A balloon payment is one that A) is paid at the outset of a loan. B) is usually the last installment payment and generally for an amount much greater than the other monthly payments. C) includes all interest on the loan paid in advance. D) is a “floating” payment, meaning the lender can demand its […]
Date: September 19th, 2020
Cash serves as a relative liquid short-term store of value. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Leigh Delight Candy, Inc is choosing between two bonds in which to invest their cash. One is being offered from Hershey’s and will mature in 10 years and pay $30 each quarter. The other alternative is a Mars’ bond that will mature in 20 years and pay $30 each quarter. What would be the present […]
Date: September 19th, 2020
The current rate of return on a one-year U.S. Government security is 3%. The rate of return on a two-year U.S. Government security is 5%. According to the expectations theory, what is the return on a one-year U.S. Government security purchased one year from today? ANSWER $1,000 × 1.03 = $1,030 at the […]
Date: September 19th, 2020
Evaluating the performance of a mutual fund involves which of the following activities? I. Determining its rate of return II. Calculating its net asset value III. Examining its turnover ratio IV. Examining its administrative expenses A) I and II B) I, III, and IV C) II, III, and IV D) All four ANSWER […]
Date: September 19th, 2020
List three forms of business organizations. What are the advantages and disadvantages of each? What will be an ideal response? ANSWER We begin with the most common, the sole proprietorship. This has the advantage of easy start-up and that the owner is his or her “own boss.” However, such firms generally have limited […]
Date: September 19th, 2020
Eastinghome Inc. just paid $8,000 to a landowner to explore for but not extract valuable minerals. If the landowner invests the money at a rate of 5.5% compounded annually for 7 years what is the investment worth at the end of that time period? A) $5,499.49 B) $11,637.43 C) $56,000.00 D) $66,135.15 ANSWER […]
Date: September 19th, 2020
A home equity loan A) is a special type of second mortgage on your home. B) can no longer provide tax-deductible interest payments. C) has a fixed term with fixed installment payments. D) exceeds owner’s equity in the home. ANSWER A
Date: September 19th, 2020
