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##### Financial management 3771 test 1

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Question;Multiple;Choice Questions;Question;1(5 points);What is the future value;of $15,000 a year for 30 years at 12 percent interest?;Question 1 options;A);$2,878,406;B);$3,619,990;C);$3,711,414;D);$3,989,476;Save;Question;2(5 points);When you retire 40 years;from now, you want to have $1.2 million. You think you can earn an average of;12 percent on your investments. To meet your goal, you are trying to decide;whether to deposit a lump sum today, or to wait and deposit a lump sum 2 years;from today. How much more will you have to deposit as a lump sum if you wait;for 2 years before making the deposit?;Question 2 options;A);$1,414.14;B);$2,319.47;C);$2,891.11;D);$3,280.78;Save;Question;3(5 points);What is the future value;of $1,200 a year for 40 years at 8 percent interest? Assume annual;compounding.;Question 3 options;A);$301,115;B);$306,492;C);$310,868;D);$342,908;Save;Question;4(5 points);You would like to give;your daughter $75,000 towards her college education 17 years from now. How much;money must you set aside today for this purpose if you can earn 8 percent on;your investments?;Question 4 options;A);$18,388.19;B);$20,270.17;C);$28,417.67;D);$29,311.13;Save;Question;5(5 points);You just;received an insurnace offer related to an accident you had six years ago.;the offer gives you one of the following three choices;Option A: $1,565 a month for 72 months;Option B $1,012 a month for 10 for 10 years;Option C: $100,000 as lump payment today;You can earn 7.5 percent on your investments. You do not care if you personally;receive the funds or if they are paid to your heirs should you die within the;settlement period. Which one of the following statements is correct given this;information?;Question 5 options;A);Option A is the best choice as it provides;the largest monthly payment.;B);Option B is the best;choice because it pays the largest total amount.;C);Option;C is the best choice because it is has the largest current value.;D);You are indifferent;to the three options as they are all equal in value.;Save;Question;6(5 points);You are scheduled to;receive annual payments of $4,800 for each of the next 7 years. The discount;rate is 8 percent. What is the difference in the present value if you receive;these payments at the beginning of each year rather than at the end of each;year?;Question 6 options;A);$1,999;B);$2,013;C);$2,221;D);$2227;Save;Question;7(5 points);Gerold invested $6,200;in an account that pays 5 percent simple interest. How much money will he have;at the end of ten years?;Question 7 options;A);$8,710;B);$9,000;C);$9,300;D);$9,678;Save;Question;8(5 points);You invested $1,650 in;an account that pays 5 percent simple interest. How much more could you have;earned over a 20-year period if the interest had compounded annually?;Question 8 options;A);$849.22;B);$930.11;C);$982.19;D);$1,077.94;Save;Question;9(5 points);Oil Well Supply offers;7.5 percent coupon bonds with semiannual payments and a yield to maturity of;7.68 percent. The bonds mature in 6 years. What is the market price per bond if;the face value is $1,000?;Question 9 options;A);$989.70;B);$991.47;C);$996.48;D);$1002.60;Save;Question;10(5 points);This morning, TL;Trucking invested $80,000 to help fund a company expansion project planned for;4 years from now. How much additional money will the firm have 4 years from now;if it can earn 5 percent rather than 4 percent on its savings?;Question 10 options;A);$2,940.09;B);$3,651.82;C);$4,008.17;D);$4,219.68;Question 11 (10;points) Question 11 Unsaved;Why is the idea of present value so important;to Finance? How does the technique help in decision making? Give an example.Question 12 (10;points) Question 12 Unsaved;What is the;difference between an ordinary annuity and an annuity due?Question 13 (10;points) Question 13 Unsaved;What is the face value of a bond? What is the coupon rate of a bond? How does bond pricing work? What factors go into the price of a bond?Question 14 (10;points) Question 14 Unsaved;Explain what a bond indenture is. What are bond covenants and why are they;critical to bond purchasers?Question 15 (10;points) Question 15 Unsaved;What do bond ratings;tell the purchaser of a bond? Why are bond ratings important to bond prices?

Paper#49260 | Written in 18-Jul-2015

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