FNAN 522 EXAM 1 QUESTIONS AND ANSWERS
A company issued debt that did not grant the bondholders the ability to seize the
company's assets to settle the obligation. This debt can be traded on a public exchange.
Which of the following best describes this debt? - Answers -Public, unsecured debt.
Which of the following is NOT a cash equivalent? - Answers -A government bond that
matures in four months.
Which of the following occurred during the financial crisis of 2007-2008? - Answers -All
of these answers
Which of the following statements regarding shareholder and market value is correct? -
Answers -The idea of maximizing market value is related to the idea of maximizing
shareholder value.
How is finance used in organizations? - Answers -All of these answers.
Which of the following terms describes the protection of personal assets stemming from
the corporate structure? - Answers -limited liability
Which of the following is a factor that contributes to the conflict of interest between a
company's bondholders and its shareholders? - Answers -All of these answers
Which of the following is a legal characteristic of a general partnership? - Answers -
There must be at least two business owners.
Which of the following is a type of financial market? - Answers -All of these answers
Which of the following is an accurate characteristic of a sole proprietorship? - Answers
-The owner is personally liable for the business's debt and obligations.
A company issues a bond with the provision that it may pay off the debt early. This bond
is subject to which type of risk? - Answers -Prepayment risk.
What will $247,000 grow to be in 9 years if it is invested today in an account with an
annual interest rate of 11%? - Answers -631,835.12
Approximately how many years will it take for $136,000 to grow to be $468,000 if it is
invested in an account with an annual interest rate of 8%? Choose the closest answer. -
Answers -16 years.
At what annual interest rate must $137,000 be invested so that it will grow to be
$475,000 in 14 years? Choose the closest rate. - Answers -9.29%
, If you wish to accumulate $197,000 in 5 years, how much must you deposit today in an
account that pays a quoted annual interest rate of 13% with semi-annual compounding
of interest? Round to the nearest dollar. - Answers -$104,947
What will $153,000 grow to be in 13 years if it is invested today in an account with a
quoted annual interest rate of 10% with monthly compounding of interest? Round to the
nearest dollar. - Answers -$558,386
You are offered an investment with a quoted annual interest rate of 13% with quarterly
compounding of interest. What is your effective annual interest rate? - Answers -
13.65%
You are offered an annuity that will pay $24,000 per year for 11 years (the first payment
will occur one year from today). If you feel that the appropriate discount rate is 13%,
what is the annuity worth to you today? Round to the nearest dollar. - Answers -
$136,487
You plan to buy a car that has a total "drive-out" cost of $25,700. You will make a down
payment of $3,598. The remainder of the car's cost will be financed over a period of 5
years. You will repay the loan by making equal monthly payments. Your quoted annual
interest rate is 8% with monthly compounding of interest. (The first payment will be due
one month after the purchase date.) What will your monthly payment be? - Answers -
$448.15
If you deposit $16,000 per year for 12 years (each deposit is made at the end of each
year) in an account that pays an annual interest rate of 14%, what will your account be
worth at the end of 12 years? Round to the nearest dollar. - Answers -$436,332
John and Peggy recently bought a house. They financed the house with a $125,000,
30-year mortgage with a nominal annual interest rate of 7 percent with monthly
compounding. Mortgage payments are made at the end of each month. What is the
monthly mortgage payment? - Answers -$831.63
By increasing the number of compounding periods in a year, while holding the stated
annual interest rate constant, you will... - Answers -increase the effective annual rate.
If you wish to accumulate $140,000 in 13 years, how much must you deposit today in an
account that pays an annual interest rate of 14%? - Answers -$25,489.71
A portfolio has $70,000 of bonds and $30,000 of stock. The bonds are 80% likely to
have a 10% return and 20% likely to have a 0% return. The stock is 50% likely to have a
20% return and 50% likely to have a 10% loss. What is the expected return? - Answers
-7.10%
A company issued debt that did not grant the bondholders the ability to seize the
company's assets to settle the obligation. This debt can be traded on a public exchange.
Which of the following best describes this debt? - Answers -Public, unsecured debt.
Which of the following is NOT a cash equivalent? - Answers -A government bond that
matures in four months.
Which of the following occurred during the financial crisis of 2007-2008? - Answers -All
of these answers
Which of the following statements regarding shareholder and market value is correct? -
Answers -The idea of maximizing market value is related to the idea of maximizing
shareholder value.
How is finance used in organizations? - Answers -All of these answers.
Which of the following terms describes the protection of personal assets stemming from
the corporate structure? - Answers -limited liability
Which of the following is a factor that contributes to the conflict of interest between a
company's bondholders and its shareholders? - Answers -All of these answers
Which of the following is a legal characteristic of a general partnership? - Answers -
There must be at least two business owners.
Which of the following is a type of financial market? - Answers -All of these answers
Which of the following is an accurate characteristic of a sole proprietorship? - Answers
-The owner is personally liable for the business's debt and obligations.
A company issues a bond with the provision that it may pay off the debt early. This bond
is subject to which type of risk? - Answers -Prepayment risk.
What will $247,000 grow to be in 9 years if it is invested today in an account with an
annual interest rate of 11%? - Answers -631,835.12
Approximately how many years will it take for $136,000 to grow to be $468,000 if it is
invested in an account with an annual interest rate of 8%? Choose the closest answer. -
Answers -16 years.
At what annual interest rate must $137,000 be invested so that it will grow to be
$475,000 in 14 years? Choose the closest rate. - Answers -9.29%
, If you wish to accumulate $197,000 in 5 years, how much must you deposit today in an
account that pays a quoted annual interest rate of 13% with semi-annual compounding
of interest? Round to the nearest dollar. - Answers -$104,947
What will $153,000 grow to be in 13 years if it is invested today in an account with a
quoted annual interest rate of 10% with monthly compounding of interest? Round to the
nearest dollar. - Answers -$558,386
You are offered an investment with a quoted annual interest rate of 13% with quarterly
compounding of interest. What is your effective annual interest rate? - Answers -
13.65%
You are offered an annuity that will pay $24,000 per year for 11 years (the first payment
will occur one year from today). If you feel that the appropriate discount rate is 13%,
what is the annuity worth to you today? Round to the nearest dollar. - Answers -
$136,487
You plan to buy a car that has a total "drive-out" cost of $25,700. You will make a down
payment of $3,598. The remainder of the car's cost will be financed over a period of 5
years. You will repay the loan by making equal monthly payments. Your quoted annual
interest rate is 8% with monthly compounding of interest. (The first payment will be due
one month after the purchase date.) What will your monthly payment be? - Answers -
$448.15
If you deposit $16,000 per year for 12 years (each deposit is made at the end of each
year) in an account that pays an annual interest rate of 14%, what will your account be
worth at the end of 12 years? Round to the nearest dollar. - Answers -$436,332
John and Peggy recently bought a house. They financed the house with a $125,000,
30-year mortgage with a nominal annual interest rate of 7 percent with monthly
compounding. Mortgage payments are made at the end of each month. What is the
monthly mortgage payment? - Answers -$831.63
By increasing the number of compounding periods in a year, while holding the stated
annual interest rate constant, you will... - Answers -increase the effective annual rate.
If you wish to accumulate $140,000 in 13 years, how much must you deposit today in an
account that pays an annual interest rate of 14%? - Answers -$25,489.71
A portfolio has $70,000 of bonds and $30,000 of stock. The bonds are 80% likely to
have a 10% return and 20% likely to have a 0% return. The stock is 50% likely to have a
20% return and 50% likely to have a 10% loss. What is the expected return? - Answers
-7.10%
