FIN 3010 Exam UPDATED ACTUAL
QUESTIONS AND CORRECT ANSWERS
Comet Powder Company has purchased a piece of equipment costing $100,000. It is expected to
generate a ten-year stream of benefits amounting to $16,273 per year. Determine the rate of return
Comet expects to earn from this equipment. - CORRECT ANSWER 10%
You have just won a $50,000 bond that pays no interest and matures in 20 years. If the discount rate is
10%, what is the present value of your bond? - CORRECT ANSWER $7,450
BB&C bank has agreed to lend you $30,000 today, but you must repay $42,135 in 3 years. What rate
is the bank charging you? - CORRECT ANSWER 12%
____ interest is paid not only on the principal but also on any interest earned but not withdrawn
during earlier periods. - CORRECT ANSWER compound
Billy Bob has decided to put $2,400 a year (at the end of each year) into an IRA over his 40-year
working life and then retire. What will Billy have if the account will earn 10 percent compounded
annually? - CORRECT ANSWER $1,062,223
John is 25 years old and wishes to retire in 30 years. His plan is to invest in a mutual fund earning a
12 percent annual return and have a $1 million retirement fund at age 55. How much must he invest at
the end of each year to achieve this goal? - CORRECT ANSWER $4,143.65
Zero coupon bonds are an example of ___________. - CORRECT ANSWER original issue
deep discount bonds
The yield-to-maturity of a bond with a finite maturity date is a function of all of the following
variables EXCEPT the ____________. - CORRECT ANSWER required rate of return on the
bond
What is the rate of return on a preferred stock that has a par value of $50, a market price of $46.50,
and a dividend of $4.10? - CORRECT ANSWER 8.82%
QUESTIONS AND CORRECT ANSWERS
Comet Powder Company has purchased a piece of equipment costing $100,000. It is expected to
generate a ten-year stream of benefits amounting to $16,273 per year. Determine the rate of return
Comet expects to earn from this equipment. - CORRECT ANSWER 10%
You have just won a $50,000 bond that pays no interest and matures in 20 years. If the discount rate is
10%, what is the present value of your bond? - CORRECT ANSWER $7,450
BB&C bank has agreed to lend you $30,000 today, but you must repay $42,135 in 3 years. What rate
is the bank charging you? - CORRECT ANSWER 12%
____ interest is paid not only on the principal but also on any interest earned but not withdrawn
during earlier periods. - CORRECT ANSWER compound
Billy Bob has decided to put $2,400 a year (at the end of each year) into an IRA over his 40-year
working life and then retire. What will Billy have if the account will earn 10 percent compounded
annually? - CORRECT ANSWER $1,062,223
John is 25 years old and wishes to retire in 30 years. His plan is to invest in a mutual fund earning a
12 percent annual return and have a $1 million retirement fund at age 55. How much must he invest at
the end of each year to achieve this goal? - CORRECT ANSWER $4,143.65
Zero coupon bonds are an example of ___________. - CORRECT ANSWER original issue
deep discount bonds
The yield-to-maturity of a bond with a finite maturity date is a function of all of the following
variables EXCEPT the ____________. - CORRECT ANSWER required rate of return on the
bond
What is the rate of return on a preferred stock that has a par value of $50, a market price of $46.50,
and a dividend of $4.10? - CORRECT ANSWER 8.82%
