FINANCE 380 EXAM 1 | QUESTIONS AND ANSWERS |
2026 UPDATE | WITH COMPLETE SOLUTION
One of the underlying principles of finance is that cash is Answer - King
Newly-created securities are issued to their initial investors in the Answer -
Primary market
Limited liability exists for Answer - limited partners and shareholders
You purchase securities directly from an entity. That entity is a securities
Answer - dealer
Double taxation may exist in Answer - Corporations
Ultimate control of a corporation is held by the Answer - Stockholders
A market is which security prices quickly reflect new information is said to be
Answer - Efficient
In order for a particular security to be traded on a particular exchange, the
security must be __________ on the exchange Answer - listed
, The day-to-day decisions in a firm are typically made by the Answer -
Management team
Which of the following files its own tax return (is a separate tax-paying entity)
Answer - Corporation
The present value and the discount rate are __________ related, everything
else equal Answer - inversely
What is the present value of $1,800 to be received ten years from now
discounted at 5% APR compounded quarterly? Answer - $1,095.14
What is the present value of $10,000 to be received seven years from now
discounted at 5% APR compounded annually? Answer - $7,106.81
According to the rule of 72, an investment that earns 10% annual interest will
double in approximately 7.2 years. Answer - True
What is the future value ten years from now of $2,500 invested at 6% APR
compounded monthly? Answer - $4,548.49
How many years does it take for $10,000 to grow into $48,010.21 if the
investment earns 8% APR compounded semi-annually? Answer - 20
A $20,000 investment compounds monthly for 120 months and grows into
$28,000. What is the APR earned by this investment? Answer - 3.37%
An investment of $20,000 grows into $35,000 over a period of 6 years. What is
the APR? Remember, when the compounding period is not given, we assume
annual compounding. Answer - 9.78%
2026 UPDATE | WITH COMPLETE SOLUTION
One of the underlying principles of finance is that cash is Answer - King
Newly-created securities are issued to their initial investors in the Answer -
Primary market
Limited liability exists for Answer - limited partners and shareholders
You purchase securities directly from an entity. That entity is a securities
Answer - dealer
Double taxation may exist in Answer - Corporations
Ultimate control of a corporation is held by the Answer - Stockholders
A market is which security prices quickly reflect new information is said to be
Answer - Efficient
In order for a particular security to be traded on a particular exchange, the
security must be __________ on the exchange Answer - listed
, The day-to-day decisions in a firm are typically made by the Answer -
Management team
Which of the following files its own tax return (is a separate tax-paying entity)
Answer - Corporation
The present value and the discount rate are __________ related, everything
else equal Answer - inversely
What is the present value of $1,800 to be received ten years from now
discounted at 5% APR compounded quarterly? Answer - $1,095.14
What is the present value of $10,000 to be received seven years from now
discounted at 5% APR compounded annually? Answer - $7,106.81
According to the rule of 72, an investment that earns 10% annual interest will
double in approximately 7.2 years. Answer - True
What is the future value ten years from now of $2,500 invested at 6% APR
compounded monthly? Answer - $4,548.49
How many years does it take for $10,000 to grow into $48,010.21 if the
investment earns 8% APR compounded semi-annually? Answer - 20
A $20,000 investment compounds monthly for 120 months and grows into
$28,000. What is the APR earned by this investment? Answer - 3.37%
An investment of $20,000 grows into $35,000 over a period of 6 years. What is
the APR? Remember, when the compounding period is not given, we assume
annual compounding. Answer - 9.78%
