FIN 300 Midterm || Top Grade Assured.
under which of the following discounting methods will the present value of an investment be the
highest, assuming the same annual interest rate correct answers yearly
what will increase the future value of an investment correct answers an increase in the rate of
interest
mechanisms can help to better align the behavior of managers with the goals of stockholders.
These include correct answers (1) board of directors, (2) management compensation, (3)
managerial labor market, (4) other managers, (5) large stockholders, (6) the takeover market, and
(7) the legal and regulatory environment.
Loss Leader correct answers A product/service being sold at a loss to attract customers to
purchase other products/services
what is the rule of 72 correct answers 72 / % Investment = # years to double
suppose three investments have equal lives and multiple cash flows, a high discount rate tends to
favor correct answers the investment with large cash flows early
Robert White will receive cash flows of $4,450, $4,775, and $5,125from his investment. If he
can earn 7 percent on any investment that he makes, what is the future value of his investment
cash flows at the end of three years? (Round to the nearest dollar.) correct answers FV=
$4,450(1.07)^2 + $4,775(1.07)^1 + $5,125 = $15329.06
how to calculate present value of growing perpetuity (PVA) correct answers PVA = CFI / (I - g)
g = annual growth rate
I = discount rate
how to find the value of a share of preferred stock correct answers PVP = CF / I%
, why did Anderson build a consulting practice alongside its existing auditing practice correct
answers a boom of mergers and acquisitions and the emergence of information technology in the
1980's enabled consulting to become an extremely profitable business for Anderson
what are money markets correct answers lower in risk, have high liquidity (close substitutes for
cash), and where short term debt instruments are traded, has maturities for less than one year
what are capital markets correct answers has maturities for over a year, less marketable, and has
higher risk
T or F: liquidity and marketability are often used interchangeably because liquid securities are
usually easily marketable correct answers false
when do interest rates increase correct answers when the demand for money increase
fisher equation correct answers I = real rate of interest = inflation rate + (real rate of interest *
inflation rate) or
nominal interest rate = real interest rate + inflation
the ___ measures the inflation adjusted cost of borrowing correct answers real interest rate
T or F: the fisher equation forecasts the nominal rate of interest as the difference between the real
rate of interest and the rate of inflation correct answers false -add inflation not the difference
you just purchased a share of IBM stock on the New York Stock Exchange. What kind of
transaction is this correct answers secondary market transaction
private placements correct answers sales of unregistered securities and directly to investors, such
as insurance companies and/or wealthy individuals
under which of the following discounting methods will the present value of an investment be the
highest, assuming the same annual interest rate correct answers yearly
what will increase the future value of an investment correct answers an increase in the rate of
interest
mechanisms can help to better align the behavior of managers with the goals of stockholders.
These include correct answers (1) board of directors, (2) management compensation, (3)
managerial labor market, (4) other managers, (5) large stockholders, (6) the takeover market, and
(7) the legal and regulatory environment.
Loss Leader correct answers A product/service being sold at a loss to attract customers to
purchase other products/services
what is the rule of 72 correct answers 72 / % Investment = # years to double
suppose three investments have equal lives and multiple cash flows, a high discount rate tends to
favor correct answers the investment with large cash flows early
Robert White will receive cash flows of $4,450, $4,775, and $5,125from his investment. If he
can earn 7 percent on any investment that he makes, what is the future value of his investment
cash flows at the end of three years? (Round to the nearest dollar.) correct answers FV=
$4,450(1.07)^2 + $4,775(1.07)^1 + $5,125 = $15329.06
how to calculate present value of growing perpetuity (PVA) correct answers PVA = CFI / (I - g)
g = annual growth rate
I = discount rate
how to find the value of a share of preferred stock correct answers PVP = CF / I%
, why did Anderson build a consulting practice alongside its existing auditing practice correct
answers a boom of mergers and acquisitions and the emergence of information technology in the
1980's enabled consulting to become an extremely profitable business for Anderson
what are money markets correct answers lower in risk, have high liquidity (close substitutes for
cash), and where short term debt instruments are traded, has maturities for less than one year
what are capital markets correct answers has maturities for over a year, less marketable, and has
higher risk
T or F: liquidity and marketability are often used interchangeably because liquid securities are
usually easily marketable correct answers false
when do interest rates increase correct answers when the demand for money increase
fisher equation correct answers I = real rate of interest = inflation rate + (real rate of interest *
inflation rate) or
nominal interest rate = real interest rate + inflation
the ___ measures the inflation adjusted cost of borrowing correct answers real interest rate
T or F: the fisher equation forecasts the nominal rate of interest as the difference between the real
rate of interest and the rate of inflation correct answers false -add inflation not the difference
you just purchased a share of IBM stock on the New York Stock Exchange. What kind of
transaction is this correct answers secondary market transaction
private placements correct answers sales of unregistered securities and directly to investors, such
as insurance companies and/or wealthy individuals
