You are about to purchase a new car from a dealer who has a new and unusual payment plan. You have the choice to pay $28,000 cash today or $31,000 in four years. If you have the opportunity to borrow the cash price value of the car at a rate of 2.5% and repay the […]
Date: September 19th, 2020
The required rate of return for an asset is equal to the risk-free rate plus a risk premium. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The Rule of 78 is sometime used to calculate the A) interest refunded on early repayment of a loan. B) term of the loan. C) monthly payment on the loan. D) balloon payment at the end of the loan. ANSWER A
Date: September 19th, 2020
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 […]
Date: September 19th, 2020
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
Date: September 19th, 2020
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
Date: September 19th, 2020
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 […]
Date: September 19th, 2020
Which alternative below generally offers the highest potential yield and highest risk? A) NOW accounts B) CDs C) MMDAs D) U.S. Series EE bonds ANSWER B
Date: September 19th, 2020
Joe is deciding whether or not to invest $10,000 in a business that has pending lawsuits against it. If Joe invests and the business loses the lawsuits, the most Joe can lose is: A) $10,000 if Joe is a general partner. B) $10,000 if Joe is a sole proprietor. C) $10,000 if Joe is a […]
Date: September 19th, 2020
If a firm is in a zero tax bracket, then the levered and unlevered betas will be identical no matter what the debt-equity ratio. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
