F
[*
Multiple choice
1. The real risk-free rate is...
a.
,n
The risk-free rate plus the liquidity premium
(UJ fne risk-free rate minus the inflation premium
c. The default risk premium minus the liquidity premium
d. The risk-free rate minus the default risk premium
2. Current assets are made up of...(.$qt\
a. Accounts receivable
b. lnventory
@ e..ornts payable
d. Cash
3. A progressive tax structure means specifically that...
a. Every dollar of income is taxed at the same rate
b. Lower levels of income are taxed at higher rates
c. lt is a consumption tax
niefrer levels of income are taxed at higher rates
@
4. A set of payments you must make of the same amount each month for the next 30 years is'..
on annuity
@
b. A lump-sum
c. Uneven PaYments
d. Revenue
This is an example of what type of yield curve?
.a. NormalYield Curve
(b) tnverted Yield Curve
c. AbnormalYield Curve
d. BellCurve
lnterest on municipal bonds is...
a. Taxed the same at capital gain rates
/0 not taxable
Y. Taxed at twice the ordinary rate
d. Not a realthing
7. The three portions of the balante sheet are... eXclpt
, Lawsuits
b. Liabilities
c. Assets
d. Owne/s Equity
Matchine
8. Annuitv Due a. Iaxrate on last unit of income
9. Term structure of interest b. sa portlon of ownership in a corporation
rates
10. t\ffiEmeTTarffie- c. Relationship between interest rates and maturities of securities
11",€emmon Stock. d. Annuity where payments are received at the beg. of the period
t?/ Alan wants to buy Caesar's Palace and wants to know a good price to pay for it. Assume he uses
a 1O% interest rate. lf his purchase would create cash flows of 51,000 for each of the next 5
years and then S2O,OO0 for the fifteen years after that, what would a fair price be?
Answer: Cio =O a ?<t,Otto
y1pv" It,116.3lty
CO a
' c0, -- l,rt..t,: lf,
t 1r ,atc. 33 Fo,: f,
Fo
r: Nfu. ?
f: to
ry. out a loan to bail Teddy out of a Bangkok jail. The current risk free rate is
Phn is looking to take
V Yo.The bank determines that Phil requires a default risk premium of 9% and a liquidity
premium of 6.5%. Given this, what interest rate would the bank require Phil to pay?
1"6 t lolb 't (,$% :
Answer:
lq,[oco
[{,So1o
14. Stu is trying to decide between two bonds. The one is a Sprint corporate bond and the other is a
Columbia municipat bond. The Sprint bond has an 8%oyield and the Columbia bond a 6.1% yield.
lf Stu is in the 25% tax bracket, which bond should he choose?
Answer:
\' sk",tl &*rl. Spn^s' t?" I fi- 'or)
: w'67b{a
&
/aL-b\a., 6,f/" f 0- *s] ,
rf,rnt L*l ba..r
(,tl"L
\O.tr7. ) t,B"L ,h
15. Mr. Chow takes out a loan to buy a Baja powerboat. The boat cost him $179,000. The.loan has
an interest rate of 7Yo.lf Mr. Chow makes St,500 monthly payments, how many months will it
take to pay off the loan? (Give an integer answer)
Answer:
n,: Fv= - lZootl
1r
"*)3 Ph. t1 fl^l; -rsort
^= 10, f3gr
y1 7 Fv, C
a
[*
Multiple choice
1. The real risk-free rate is...
a.
,n
The risk-free rate plus the liquidity premium
(UJ fne risk-free rate minus the inflation premium
c. The default risk premium minus the liquidity premium
d. The risk-free rate minus the default risk premium
2. Current assets are made up of...(.$qt\
a. Accounts receivable
b. lnventory
@ e..ornts payable
d. Cash
3. A progressive tax structure means specifically that...
a. Every dollar of income is taxed at the same rate
b. Lower levels of income are taxed at higher rates
c. lt is a consumption tax
niefrer levels of income are taxed at higher rates
@
4. A set of payments you must make of the same amount each month for the next 30 years is'..
on annuity
@
b. A lump-sum
c. Uneven PaYments
d. Revenue
This is an example of what type of yield curve?
.a. NormalYield Curve
(b) tnverted Yield Curve
c. AbnormalYield Curve
d. BellCurve
lnterest on municipal bonds is...
a. Taxed the same at capital gain rates
/0 not taxable
Y. Taxed at twice the ordinary rate
d. Not a realthing
7. The three portions of the balante sheet are... eXclpt
, Lawsuits
b. Liabilities
c. Assets
d. Owne/s Equity
Matchine
8. Annuitv Due a. Iaxrate on last unit of income
9. Term structure of interest b. sa portlon of ownership in a corporation
rates
10. t\ffiEmeTTarffie- c. Relationship between interest rates and maturities of securities
11",€emmon Stock. d. Annuity where payments are received at the beg. of the period
t?/ Alan wants to buy Caesar's Palace and wants to know a good price to pay for it. Assume he uses
a 1O% interest rate. lf his purchase would create cash flows of 51,000 for each of the next 5
years and then S2O,OO0 for the fifteen years after that, what would a fair price be?
Answer: Cio =O a ?<t,Otto
y1pv" It,116.3lty
CO a
' c0, -- l,rt..t,: lf,
t 1r ,atc. 33 Fo,: f,
Fo
r: Nfu. ?
f: to
ry. out a loan to bail Teddy out of a Bangkok jail. The current risk free rate is
Phn is looking to take
V Yo.The bank determines that Phil requires a default risk premium of 9% and a liquidity
premium of 6.5%. Given this, what interest rate would the bank require Phil to pay?
1"6 t lolb 't (,$% :
Answer:
lq,[oco
[{,So1o
14. Stu is trying to decide between two bonds. The one is a Sprint corporate bond and the other is a
Columbia municipat bond. The Sprint bond has an 8%oyield and the Columbia bond a 6.1% yield.
lf Stu is in the 25% tax bracket, which bond should he choose?
Answer:
\' sk",tl &*rl. Spn^s' t?" I fi- 'or)
: w'67b{a
&
/aL-b\a., 6,f/" f 0- *s] ,
rf,rnt L*l ba..r
(,tl"L
\O.tr7. ) t,B"L ,h
15. Mr. Chow takes out a loan to buy a Baja powerboat. The boat cost him $179,000. The.loan has
an interest rate of 7Yo.lf Mr. Chow makes St,500 monthly payments, how many months will it
take to pay off the loan? (Give an integer answer)
Answer:
n,: Fv= - lZootl
1r
"*)3 Ph. t1 fl^l; -rsort
^= 10, f3gr
y1 7 Fv, C
a
