FIN 3302 EXAM I
1. When evaluating financial projects and decisions, we are most interested in:
a. Total taxes
b. Marginal cash flows
c. Book values
d. Accounting profits
2. Assume that you went to Las Vegas and hit the jackpot for $5 million. Further assume that you
were offered a choice to receive the $5 million today, or receive it in two years. According to
one of the principles of finance, which would you take?
a. You would be indifferent as to when you would receive the $5 million
b. The $5 million today because it would be worth more than if you would receive it in
two years.
c. The $5 million in two years because it would be worth more than if you would receive
it today.
d. The $5 million in two years because you would be afraid of spending it all right away
3. If you want to have $5,362 in 33 months, how much money must you put in a savings account
today? Assume that the savings account pays 11% and it is compounded monthly. Round to
two decimal places.
a. $3,967.81 PV=FV(1+r)^n
4. interest means that interest is earned on both the principal payment and any
interest previously earned on the investment.
a. Nominal
b. Compound
c. Portfolio
d. Simple
5. You purchased 500 shares of Kaldwin Inc. common stock one year ago for $33.03 per share.
You received total dividends of $1.52 per share over the last year and decide to close out your
position by selling at $33.99 per share. What is your holding period return? Submit your
answer as a percentage and round to two decimal places.
a. 7.51% HRP=(Pend + Div -Pbeg)/Pbeg
6. The goal of the firm should
be
a. Maximization of sales
b. Maximization of shareholder wealth
c. Maximization of market share
d. Maximization of profits (net income per share)
7. You decide you want your child to be a millionaire. You have a son today and you deposit
$14,000 in an investment account that earns 8.41% per year. The money in the account will
be distributed to your son whenever the total reaches $1,000,000. How old will your son be
when he gets the money(round to the nearest year)?
a. 53 n=[ln(FV)/ln(PV)]/[ln(1+r)]
8. If the Beta for stock A is exactly equal to zero, then according to the CAPM
a. Stock A’s required return is equal to the risk-free rate of return
b. Stock A has a guaranteed return
c. Stock A’s required return is equal to the required return on the market portfolio
d. Stock A’s required return is greater than the required return on the market portfolio
9. Congratulations! You are the proud winner of the multi-state Sour Ball Lottery. You are to
receive
$2,000,000 at the end of each year for the next 20 years. While the Lottery Commission refers to
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, this as a $40,000,000 Jackpot, if you choose the “cash option” they will give you much less than
that; you can receive a lump sum payment today equal to the present value of the ordinary
annuity instead of the 20 annual payments. If the discount rate that the Lottery Commission uses
to determine the lump sum payoff is 2.3%, what is your payoff if you select the cash option?
Round to the nearest dollar.
a. $31,775,532 PV of annuity= PMT[(1-(1+r)^(-n)/r]
10. Proper diversification allows us to get rid of most risk.
a. Interest rate
b. Market
c. Unsystematic
d. Down-side
11. Eren purchased 800 shares of Ackerman Corp. Stock at $5.24 per share on 1/1/2016. He sold
the shares on 12/31/2016 for $6.77. Ackerman stock has a beta of 1.8. The current risk-free
rate of return is 2.7%, and the market risk premium is 3.9%. Based on the CAPM, what is the
required return on Ackerman Corp. stock? Round to the nearest two decimals
a. 9.72% Rj = Rf +Bj(MRP)
12. is used as a measure of total risk; is used as a measure of systematic risk.
a. Beta, beta
b. Beta, standard deviation
c. Standard deviation, beta
d. Standard deviation, standard deviation
13. If Samuel deposits $11,040 into a bank account that pays 5.91% interest compounded
quarterly, what will the account balance be in 9 years? Round to two decimal points.
a. $18,718.90 FV= PV(1+r)^n
14. You just graduated and landed your first job in your new career. You remember that your
favorite finance professor told you to begin the painless job of saving for retirement as soon as
possible, so you decide to put away $5,000 at the end of each year in a Roth IRA. Your expected
annual rate of return on the IRA is 8.5%. How much will you accumulate after 44 years of
investing? Round to nearest dollar.
a. $2,071,569 FV of annuity = PMT*[(((1+r)^n)-1)/r]
15. How much money must you put into a bank account yielding 4.8% (compounded annually)
in order to have $1,891.22 at the end of 8 years? Round to two decimal places
a. $1,299.73 PV=FV/(1+r)^n
16. For a given nominal interest rate, an investor would receive a greater future value with which
of the following?
a. Weekly compounding
b. Semi-annual compounding
c. Quarterly compounding
d. Annual compounding
17. To measure value, the concept of time value of money is used
a. To bring the future benefits and costs of a project, measured by its cash flows, back
to the present
b. To ensure that expected future profits exceed current profits today
c. To determine the interest rate paid on corporate debt.
d. To bring the future benefits and costs of a project, measured by its expected
profits, back to the present.
18. All of the following statements about agency problems are true except
a. Agency costs are paid by the managers who do not act in the shareholders’ best interest
b. Agency problems interfere with the goal of maximizing shareholder value
c. Agency problems result from the separation of management and the ownership of
This study source was downloaded by 100000839495789 from CourseHero.com on 02-13-2022 03:39:03 GMT -06:00
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1. When evaluating financial projects and decisions, we are most interested in:
a. Total taxes
b. Marginal cash flows
c. Book values
d. Accounting profits
2. Assume that you went to Las Vegas and hit the jackpot for $5 million. Further assume that you
were offered a choice to receive the $5 million today, or receive it in two years. According to
one of the principles of finance, which would you take?
a. You would be indifferent as to when you would receive the $5 million
b. The $5 million today because it would be worth more than if you would receive it in
two years.
c. The $5 million in two years because it would be worth more than if you would receive
it today.
d. The $5 million in two years because you would be afraid of spending it all right away
3. If you want to have $5,362 in 33 months, how much money must you put in a savings account
today? Assume that the savings account pays 11% and it is compounded monthly. Round to
two decimal places.
a. $3,967.81 PV=FV(1+r)^n
4. interest means that interest is earned on both the principal payment and any
interest previously earned on the investment.
a. Nominal
b. Compound
c. Portfolio
d. Simple
5. You purchased 500 shares of Kaldwin Inc. common stock one year ago for $33.03 per share.
You received total dividends of $1.52 per share over the last year and decide to close out your
position by selling at $33.99 per share. What is your holding period return? Submit your
answer as a percentage and round to two decimal places.
a. 7.51% HRP=(Pend + Div -Pbeg)/Pbeg
6. The goal of the firm should
be
a. Maximization of sales
b. Maximization of shareholder wealth
c. Maximization of market share
d. Maximization of profits (net income per share)
7. You decide you want your child to be a millionaire. You have a son today and you deposit
$14,000 in an investment account that earns 8.41% per year. The money in the account will
be distributed to your son whenever the total reaches $1,000,000. How old will your son be
when he gets the money(round to the nearest year)?
a. 53 n=[ln(FV)/ln(PV)]/[ln(1+r)]
8. If the Beta for stock A is exactly equal to zero, then according to the CAPM
a. Stock A’s required return is equal to the risk-free rate of return
b. Stock A has a guaranteed return
c. Stock A’s required return is equal to the required return on the market portfolio
d. Stock A’s required return is greater than the required return on the market portfolio
9. Congratulations! You are the proud winner of the multi-state Sour Ball Lottery. You are to
receive
$2,000,000 at the end of each year for the next 20 years. While the Lottery Commission refers to
This study source was downloaded by 100000839495789 from CourseHero.com on 02-13-2022 03:39:02 GMT -06:00
https://www.coursehero.com/file/27138946/FIN-3302-EXAM-Idocx/
, this as a $40,000,000 Jackpot, if you choose the “cash option” they will give you much less than
that; you can receive a lump sum payment today equal to the present value of the ordinary
annuity instead of the 20 annual payments. If the discount rate that the Lottery Commission uses
to determine the lump sum payoff is 2.3%, what is your payoff if you select the cash option?
Round to the nearest dollar.
a. $31,775,532 PV of annuity= PMT[(1-(1+r)^(-n)/r]
10. Proper diversification allows us to get rid of most risk.
a. Interest rate
b. Market
c. Unsystematic
d. Down-side
11. Eren purchased 800 shares of Ackerman Corp. Stock at $5.24 per share on 1/1/2016. He sold
the shares on 12/31/2016 for $6.77. Ackerman stock has a beta of 1.8. The current risk-free
rate of return is 2.7%, and the market risk premium is 3.9%. Based on the CAPM, what is the
required return on Ackerman Corp. stock? Round to the nearest two decimals
a. 9.72% Rj = Rf +Bj(MRP)
12. is used as a measure of total risk; is used as a measure of systematic risk.
a. Beta, beta
b. Beta, standard deviation
c. Standard deviation, beta
d. Standard deviation, standard deviation
13. If Samuel deposits $11,040 into a bank account that pays 5.91% interest compounded
quarterly, what will the account balance be in 9 years? Round to two decimal points.
a. $18,718.90 FV= PV(1+r)^n
14. You just graduated and landed your first job in your new career. You remember that your
favorite finance professor told you to begin the painless job of saving for retirement as soon as
possible, so you decide to put away $5,000 at the end of each year in a Roth IRA. Your expected
annual rate of return on the IRA is 8.5%. How much will you accumulate after 44 years of
investing? Round to nearest dollar.
a. $2,071,569 FV of annuity = PMT*[(((1+r)^n)-1)/r]
15. How much money must you put into a bank account yielding 4.8% (compounded annually)
in order to have $1,891.22 at the end of 8 years? Round to two decimal places
a. $1,299.73 PV=FV/(1+r)^n
16. For a given nominal interest rate, an investor would receive a greater future value with which
of the following?
a. Weekly compounding
b. Semi-annual compounding
c. Quarterly compounding
d. Annual compounding
17. To measure value, the concept of time value of money is used
a. To bring the future benefits and costs of a project, measured by its cash flows, back
to the present
b. To ensure that expected future profits exceed current profits today
c. To determine the interest rate paid on corporate debt.
d. To bring the future benefits and costs of a project, measured by its expected
profits, back to the present.
18. All of the following statements about agency problems are true except
a. Agency costs are paid by the managers who do not act in the shareholders’ best interest
b. Agency problems interfere with the goal of maximizing shareholder value
c. Agency problems result from the separation of management and the ownership of
This study source was downloaded by 100000839495789 from CourseHero.com on 02-13-2022 03:39:03 GMT -06:00
https://www.coursehero.com/file/27138946/FIN-3302-EXAM-Idocx/
