In devising a cash management strategy, you should assume that future interest rates A) will likely be volatile, but accurately forecasted. B) are not likely to change from the levels of present rates. C) will likely be volatile, and difficult to forecast. D) will occur in some random fashion. ANSWER C
EBIT break-even analysis indicates the projected EBIT level such that EPS is identical under two different debt-equity mix scenarios. Indicate whether the statement is true or false ANSWER TRUE
You borrow $25,000 to buy a car, and agree to make 48 monthly payments of $607.39 to repay the loan. What annual rate of interest, which is being compounded monthly, are you being charged? What will be an ideal response? ANSWER 7.75%
Given an identical contract rate, which of the following methods for determining finance charges provides the smallest monthly payment on an installment loan? A) Simple interest method B) Discount method C) Add-on method D) The monthly payment is the same under all three methods listed above. ANSWER A
Published betas are typically levered betas not unlevered betas if the firm in question has debt in its capital structure. Indicate whether the statement is true or false ANSWER TRUE
If you are seeking moderate growth and moderate current return, you should select A) a money market fund. B) an income fund. C) a balanced fund. D) a mixed fund. ANSWER C
Define systematic and unsystematic risk. What method is used to measure a firm’s market risk? What will be an ideal response? ANSWER We can divide the total risk (total variability) of our portfolio into two types of risk: 1. company-unique risk, or unsystematic risk, and 2. market risk, or systematic risk. Company-unique risk […]
Bud Wiser’s nominal income was $10,000 in 2007 and $11,000 in 2008. If the inflation rate in 2008 was 8%, Bud’s real income fell in 2008. Indicate whether the statement is true or false ANSWER FALSE
RBW Corp. has cash of $48,000; short-term notes payable of $35,000, accounts receivable of $100,000; accounts payable of $120,000; inventories of $200,000; and accruals of $90,000. What is RBW’s current ratio? A) 1.57 B) 0.64 C) 2.71 D) 1.42 ANSWER D
Bill starts a retirement fund at age 21 and plans on depositing equal annual amounts on each birthday, starting at age 21, and ending at age 60. He wants to have $2 million at age 60. John starts his fund on his 30th birthday. He wants to deposit equal annual amounts on each birthday starting […]