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FIN-315 Business Finance I Exam 2




Question;Question 1;A local brokerage firm;is offering a zero coupon certificate of deposit for $10,000. At maturity;three years from now, the investor will receive $14,000. What is the rate of;return on this investment?;Answer;14;percent;13;percent;12;percent;11;percent;Question 2;Zheng Sen wishes to;accumulate $1 million by the end of 20 years by making equal annual end-of-year;deposits over the next 20 years. If Zheng Sen can earn 10 percent on his;investments, how much must he deposit at the end of each year?;Answer;$;14,900;$;50,000;$117,453;$17,460;Question 3;Colin would like to;send her parents on a cruise for their 25th wedding anniversary. She has priced;the cruise at $15,000 and she has 5 years to accumulate this money. How much;must Janice deposit annually in an account paying 10 percent interest in order;to have enough money to send her parents on the cruise?;Answer;$1,862;$2,457;$3,000;$2,234;Question 4;The future value of;$200 received today and deposited at 8 percent compounded semi-annually for;three years is;Answer;$380.;$158.;$253.;$252.;Question 5;If the required return;is less than the coupon rate, a bond will sell at;Answer;par.;a;discount.;a;premium.;book;value.;Question 6;Bill plans to fund his;individual retirement account (IRA) with the maximum contribution of $2,000 at;the end of each year for the next 20 years. If Bill can earn 12 percent on his;contributions, how much will he have at the end of the twentieth year?;Answer;$19,292;$14,938;$40,000;$144,104;Question 7;The rate of return;earned on an investment of $50,000 today that guarantees an annuity of $10,489;for six years is approximately;Answer;5%.;7%.;30%.;None;of these.;Question 8;The present value of a;$25,000 perpetuity at a 14 percent discount rate is;Answer;$178,571.;$285,000.;$350,000.;$219,298.;Question 9;Hewitt Packing;Company has an issue of $1,000 par value bonds with a 14 percent annual;coupon interest rate. The issue has ten years remaining to the maturity date.;Bonds of similar risk are currently selling to yield a 12 percent rate of;return. The current value of each Hewitt bond is ________.;Answer;$791.00;$1,000;$1,052.24;$1,113.00;Question 10;The future value of a;$2,000 annuity due deposited at 8 percent compounded annually for each of the;next 10 years is;Answer;$28,974.;$31,292.;$14,494.;$13,420.;Question 11;What is the;approximate yield to maturity for a $1,000 par value bond selling for $1,120;that matures in 6 years and pays 12 percent interest annually?;Answer;8.5;percent;9.4;percent;12.0;percent;13.2;percent;Question 12;Tangshan Industries;has issued a bond which has a $1,000 par value and a 15 percent annual coupon;interest rate. The bond will mature in ten years and currently sells for;$1,250. Using this information, the yield to maturity on the Tangshan;Industries bond is ________.;Answer;10.79;percent;11.39;percent;12.19;percent;13.29;percent;Question 13;Find the present value;of the following stream of cash flows, assuming that the firm's opportunity;cost is 25 percent.;Answer;$27,168;$35,200;$34,000;$32,500;Question 14;A firm has an issue of;$1,000 par value bonds with a 9 percent stated interest rate outstanding. The;issue pays interest annually and has 20 years remaining to its maturity date.;If bonds of similar risk are currently earning 11 percent, the firm's bond will;sell for ________ today.;Answer;$1,000;$716.67;$840.67;$1,123.33;Question 15;The present value of;$200 to be received 10 years from today, assuming an opportunity cost of 10;percent, is;Answer;$;50.;$200.;$518.;$;77.;Question 16;Alexis owns stock in a;company which has consistently paid a growing dividend over the last 10 years.;The first year Alexis owned the stock, she received $4.50 per share and in the;10th year, she received $4.92 per share. What is the growth rate of the dividends;over the last 10 years?;Answer;5;percent;4;percent;2;percent;1;percent;Question 17;The future value of;$100 received today and deposited at 6 percent for four years is;Answer;$126.;$;79.;$124.;$116.;Question 18;Aunt Tilly borrows;$3,500 from the bank at 12 percent annually compounded interest to be repaid in;four equal annual installments. The interest paid in the first year is;Answer;$;152.;$;277.;$;420.;$1,152.;Question 19;How long would it take;for Nico to save an adequate amount for retirement if he deposits $40,000 per;year into an account beginning one year from today that pays 12 percent per;year if he wishes to have a total of $1,000,000 at retirement?;Answer;15.0;years;15.5;years;14.5;years;16.5;years;Question 20;Nico makes annual;end-of-year payments of $5,043.71 on a four-year loan with an interest rate of;13 percent. The original principal amount was;Answer;$24,462.;$15,000.;$;3,092.;$20,175.


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