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

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

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 bankâs 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 âR 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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