Question 1

$150,000 loan is to be amortized over 7 years, with annual end-of-year payments.Which of these statements is CORRECT?

Accepted Answer

A) The annual payments would be larger if the interest rate were lower. 
B) If the loan were amortized over 10 years rather than 7 years, and if the interest rate were the same in either case, the first payment would include more dollars of interest under the 7-year amortization plan. 
C) The proportion of each payment that represents interest as opposed to repayment of principal would be higher if the interest rate were lower. 
D) The proportion of each payment that represents interest versus repayment of principal would be higher if the interest rate were higher. 
E) The proportion of interest versus principal repayment would be the same for each of the 7 payments. 
A) The annual payments would be larger if the interest rate were lower. 
B) If the loan were amortized over 10 years rather than 7 years, and if the interest rate were the same in either case, the first payment would include more dollars of interest under the 7-year amortization plan. 
C) The proportion of each payment that represents interest as opposed to repayment of principal would be higher if the interest rate were lower. 
D) The proportion of each payment that represents interest versus repayment of principal would be higher if the interest rate were higher. 
E) The proportion of interest versus principal repayment would be the same for each of the 7 payments.

Question 2

years ago, Greenery Inc.earned $1.50 per share.Its earnings this year were $3.20.What was the growth rate in earnings per share (EPS) over the 5-year period?

Accepted Answer

A) 15.54% 
B) 16.36% 
C) 17.18% 
D) 18.04% 
E) 18.94% 
A) 15.54% 
B) 16.36% 
C) 17.18% 
D) 18.04% 
E) 18.94%

Question 3

Which of the following statements is CORRECT?

Accepted Answer

A) If you have a series of cash flows, each of which is positive, you can solve for I, where the solution value of I causes the PV of the cash flows to equal the cash flow at Time 0. 
B) If you have a series of cash flows, and CF0 is negative but each of the following CFs is positive, you can solve for I, but only if the sum of the undiscounted cash flows exceeds the cost. 
C) To solve for I, one must identify the value of I that causes the PV of the positive CFs to equal the absolute value of the PV of the negative CFs.This is, essentially, a trial-and-error procedure that is easy with a computer or financial calculator but quite difficult otherwise. 
D) If you solve for I and get a negative number, then you must have made a mistake. 
E) If CF0 is positive and all the other CFs are negative, then you cannot solve for I. 
A) If you have a series of cash flows, each of which is positive, you can solve for I, where the solution value of I causes the PV of the cash flows to equal the cash flow at Time 0. 
B) If you have a series of cash flows, and CF0 is negative but each of the following CFs is positive, you can solve for I, but only if the sum of the undiscounted cash flows exceeds the cost. 
C) To solve for I, one must identify the value of I that causes the PV of the positive CFs to equal the absolute value of the PV of the negative CFs.This is, essentially, a trial-and-error procedure that is easy with a computer or financial calculator but quite difficult otherwise. 
D) If you solve for I and get a negative number, then you must have made a mistake. 
E) If CF0 is positive and all the other CFs are negative, then you cannot solve for I.

Question 4

Which of the following statements is CORRECT?

Accepted Answer

A) A time line is not meaningful unless all cash flows occur annually. 
B) Time lines are useful for visualizing complex problems prior to doing actual calculations. 
C) Time lines cannot be constructed in situations where some of the cash flows occur annually but others occur quarterly. 
D) Time lines cannot be constructed for annuities where the payments occur at the beginning of the periods. 
E) Some of the cash flows shown on a time line can be in the form of annuity payments, but none can be uneven amounts. 
A) A time line is not meaningful unless all cash flows occur annually. 
B) Time lines are useful for visualizing complex problems prior to doing actual calculations. 
C) Time lines cannot be constructed in situations where some of the cash flows occur annually but others occur quarterly. 
D) Time lines cannot be constructed for annuities where the payments occur at the beginning of the periods. 
E) Some of the cash flows shown on a time line can be in the form of annuity payments, but none can be uneven amounts.

Question 5

lines can be constructed in situations where some of the cash flows occur annually but others occur quarterly.

Accepted Answer

A) True 
 B)False

Question 6

want to go to Europe 5 years from now, and you can save $3,100 per year, beginning one year from today.You plan to deposit the funds in a mutual fund that you think will return 8.5% per year.Under these conditions, how much would you have just after you make the 5th deposit, 5 years from now?

Accepted Answer

A) $18,369 
B) $19,287 
C) $20,251 
D) $21,264 
E) $22,327 
A) $18,369 
B) $19,287 
C) $20,251 
D) $21,264 
E) $22,327

Question 7

is the present value of the following cash flow stream at a rate of 12.0%?

Accepted Answer

A) $9,699 
B) $10,210 
C) $10,747 
D) $11,284 
E) $11,849 
A) $9,699 
B) $10,210 
C) $10,747 
D) $11,284 
E) $11,849

Question 8

Which of the following statements regarding a 30-year monthly payment amortized mortgage with a nominal interest rate of 10% is CORRECT?

Accepted Answer

A) The monthly payments will decline over time. 
B) A smaller proportion of the last monthly payment will be interest, and a larger proportion will be principal, than for the first monthly payment. 
C) The total dollar amount of principal being paid off each month gets smaller as the loan approaches maturity. 
D) The amount representing interest in the first payment would be higher if the nominal interest rate were 7% rather than 10%. 
E) Exactly 10% of the first monthly payment represents interest. 
A) The monthly payments will decline over time. 
B) A smaller proportion of the last monthly payment will be interest, and a larger proportion will be principal, than for the first monthly payment. 
C) The total dollar amount of principal being paid off each month gets smaller as the loan approaches maturity. 
D) The amount representing interest in the first payment would be higher if the nominal interest rate were 7% rather than 10%. 
E) Exactly 10% of the first monthly payment represents interest.

$150,000 loan is to be amortized over 7 years, with annual end-of-year payments.Which of these statements is CORRECT?

years ago, Greenery Inc.earned $1.50 per share.Its earnings this year were $3.20.What was the growth rate in earnings per share (EPS) over the 5-year period?

Which of the following statements is CORRECT?

Which of the following statements is CORRECT?

lines can be constructed in situations where some of the cash flows occur annually but others occur quarterly.

want to go to Europe 5 years from now, and you can save $3,100 per year, beginning one year from today.You plan to deposit the funds in a mutual fund that you think will return 8.5% per year.Under these conditions, how much would you have just after you make the 5th deposit, 5 years from now?

is the present value of the following cash flow stream at a rate of 12.0%?

Which of the following statements regarding a 30-year monthly payment amortized mortgage with a nominal interest rate of 10% is CORRECT?

Overview

Statements, CF, Taxes

Financial Analysis

Bonds

Risk and Return

Stocks

Financial Options

Cost of Capital

Capital Budgeting

Cash Flow and Risk

Forecasting

Valuation, Governanc

Dividends

CAP Structure

Working Capital

Multinational

Filters

Exam 4: Time Value of Money

$150,000 loan is to be amortized over 7 years, with annual end-of-year payments.Which of these statements is CORRECT?

years ago, Greenery Inc.earned $1.50 per share.Its earnings this year were $3.20.What was the growth rate in earnings per share (EPS) over the 5-year period?

Which of the following statements is CORRECT?

Which of the following statements is CORRECT?

lines can be constructed in situations where some of the cash flows occur annually but others occur quarterly.

want to go to Europe 5 years from now, and you can save $3,100 per year, beginning one year from today.You plan to deposit the funds in a mutual fund that you think will return 8.5% per year.Under these conditions, how much would you have just after you make the 5th deposit, 5 years from now?

is the present value of the following cash flow stream at a rate of 12.0%?

Which of the following statements regarding a 30-year monthly payment amortized mortgage with a nominal interest rate of 10% is CORRECT?

Overview

Statements, CF, Taxes

Financial Analysis

Bonds

Risk and Return

Stocks

Financial Options

Cost of Capital

Capital Budgeting

Cash Flow and Risk

Forecasting

Valuation, Governanc

Dividends

CAP Structure

Working Capital

Multinational

Filters