Finance 300 Final Exam Questions and
Answers Graded A+
In general, people like us should behave as if financial markets are - Correct
answer-Strong-form efficient
If your investment pays the same amount at the end of each year for a period of six
years, the cash flow stream is called: - Correct answer-an ordinary annuity
The process of converting financial securities with one set of characteristics into
securities with another set of characteristics is called: - Correct answer-financial
intermediation.
Joseph Harris is considering an investment that pays 6.5 percent annually. How
much must he invest today such that he will have $25,000 in seven years? (Round
to the nearest dollar.) - Correct answer-$16,088
If inflation is anticipated to be 6 percent during the next year, while the real rate of
interest for a one-year loan is 7 percent, then what should the nominal rate of
interest be for a risk-free one-year loan? - Correct answer-13 percent.
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
,Which of the following mechanisms can help to align the behavior of managers
with the goals of stockholders? - Correct answer-A) Well-designed management
compensation
B) Managerial labor market
C) An independent board of directors
Unlimited liability means that the owner of a firm is responsible for - Correct
answer-paying all of the bills of the firm.
When the discount rate: - Correct answer-decreases, the present value of any future
cash flow increases.
ABC Corp. took out a loan and will repay $2,000 every year for three years,
beginning one year from today. If the interest rate on the loan is 7%, compounded
annually, how much is the loan? Round to the nearest dollar. - Correct answer-
$5248
Which form of business organization generate(s) the majority of business revenues
and profits in the United States? - Correct answer-Corporation
Using the rule of 72, how long does it take $5,000 to double, assuming a
compound rate of 1% per year? Round your answer to one decimal place. - Correct
answer-72.0 years
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
,Which of the following is true of the discounting factor? - Correct answer-
Discounting factor is the reciprocal of compounding factor.
Juan and Rachel Burpo plan to buy a time-share in six years costing $16,860. In
order to have adequate funds to do so, the Burpos want to make a deposit to their
money market fund today. Assume that they will be able to earn an investment rate
of 5.75%, compounded annually. How much will they need to deposit today to
achieve their goal? Round to the nearest dollar. - Correct answer-$12,055
The ease with which a security can be sold and converted into cash is called: -
Correct answer-liquidity
Which of the following statements is true? - Correct answer-The longer the time
period that funds are invested, the greater the future value.
Which of the following investments will have the highest future value? - Correct
answer-$1,000 invested at an annual interest rate of 10% for 10 years
Krysel Inc. is expecting a new project to start producing cash flows beginning at
the end of this year. They expect cash flows to be:
12345
$663,547 $698,214 $795,908 $798,326 $755,444
©COPYRIGHT 2025, ALL RIGHTS RESERVED 3
, If they can reinvest these cash flows to earn a return of 9.2 percent, what is the
future value of this cash flow stream at the end of five years? (Round to the nearest
dollar.) - Correct answer-$4,429,046
Paul Springer plans to save for a down payment for a house in 10 years. He will be
able to invest $12,000 today in a money market account that will pay him an
interest of 5.50 percent on a monthly basis. How much will he have at the end of
10 years? - Correct answer-$20,773
Which organizational form best enables a firm to sell its securities to the market? -
Correct answer-public corporation
Which of the following statements is true of amortization? - Correct answer-None
of the above is true.
Which of the following is a benefit of a common-size income statement? - Correct
answer-It can tell the analyst a great deal about a firm's efficiency and profitability
Which of the following is true of a firm that has no debt in its capital structure? -
Correct answer-Its return on equity (ROE) will be equal to its return on asset
(ROA).
©COPYRIGHT 2025, ALL RIGHTS RESERVED 4
Answers Graded A+
In general, people like us should behave as if financial markets are - Correct
answer-Strong-form efficient
If your investment pays the same amount at the end of each year for a period of six
years, the cash flow stream is called: - Correct answer-an ordinary annuity
The process of converting financial securities with one set of characteristics into
securities with another set of characteristics is called: - Correct answer-financial
intermediation.
Joseph Harris is considering an investment that pays 6.5 percent annually. How
much must he invest today such that he will have $25,000 in seven years? (Round
to the nearest dollar.) - Correct answer-$16,088
If inflation is anticipated to be 6 percent during the next year, while the real rate of
interest for a one-year loan is 7 percent, then what should the nominal rate of
interest be for a risk-free one-year loan? - Correct answer-13 percent.
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
,Which of the following mechanisms can help to align the behavior of managers
with the goals of stockholders? - Correct answer-A) Well-designed management
compensation
B) Managerial labor market
C) An independent board of directors
Unlimited liability means that the owner of a firm is responsible for - Correct
answer-paying all of the bills of the firm.
When the discount rate: - Correct answer-decreases, the present value of any future
cash flow increases.
ABC Corp. took out a loan and will repay $2,000 every year for three years,
beginning one year from today. If the interest rate on the loan is 7%, compounded
annually, how much is the loan? Round to the nearest dollar. - Correct answer-
$5248
Which form of business organization generate(s) the majority of business revenues
and profits in the United States? - Correct answer-Corporation
Using the rule of 72, how long does it take $5,000 to double, assuming a
compound rate of 1% per year? Round your answer to one decimal place. - Correct
answer-72.0 years
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
,Which of the following is true of the discounting factor? - Correct answer-
Discounting factor is the reciprocal of compounding factor.
Juan and Rachel Burpo plan to buy a time-share in six years costing $16,860. In
order to have adequate funds to do so, the Burpos want to make a deposit to their
money market fund today. Assume that they will be able to earn an investment rate
of 5.75%, compounded annually. How much will they need to deposit today to
achieve their goal? Round to the nearest dollar. - Correct answer-$12,055
The ease with which a security can be sold and converted into cash is called: -
Correct answer-liquidity
Which of the following statements is true? - Correct answer-The longer the time
period that funds are invested, the greater the future value.
Which of the following investments will have the highest future value? - Correct
answer-$1,000 invested at an annual interest rate of 10% for 10 years
Krysel Inc. is expecting a new project to start producing cash flows beginning at
the end of this year. They expect cash flows to be:
12345
$663,547 $698,214 $795,908 $798,326 $755,444
©COPYRIGHT 2025, ALL RIGHTS RESERVED 3
, If they can reinvest these cash flows to earn a return of 9.2 percent, what is the
future value of this cash flow stream at the end of five years? (Round to the nearest
dollar.) - Correct answer-$4,429,046
Paul Springer plans to save for a down payment for a house in 10 years. He will be
able to invest $12,000 today in a money market account that will pay him an
interest of 5.50 percent on a monthly basis. How much will he have at the end of
10 years? - Correct answer-$20,773
Which organizational form best enables a firm to sell its securities to the market? -
Correct answer-public corporation
Which of the following statements is true of amortization? - Correct answer-None
of the above is true.
Which of the following is a benefit of a common-size income statement? - Correct
answer-It can tell the analyst a great deal about a firm's efficiency and profitability
Which of the following is true of a firm that has no debt in its capital structure? -
Correct answer-Its return on equity (ROE) will be equal to its return on asset
(ROA).
©COPYRIGHT 2025, ALL RIGHTS RESERVED 4
