Financial Management Midterm1
1- Starting to invest early for retirement reduces the benefits of compound interest. a. True
b. False
b
2- How much would $1, growing at 3.5% per year, be worth after 75 years? a. $12.54 b. $13.20 c. $13.86 d. $14.55 e. $15.28 b 3- How much would $20,000 due in 50 years be worth today if the discount rate were 7.5%? a. $438.03 b. $461.08 c. $485.35 d. $510.89 e. $537.78 e 4- Suppose the U.S. Treasury offers to sell you a bond for $3,000. No payments will be made until the bond matures 10 years from now, at which time it will be redeemed for $5,000. What interest rate would you earn if you bought this bond at the offer price? a. 3.82% b. 4.25% c. 4.72% d. 5.24% e. 5.77% d 5- The Morrissey Company's bonds mature in 7 years, have a par value of $1,000, and make an annual coupon payment of $70. The market interest rate for the bonds is 8.5%. What is the bond's price? | | | a. | $923.22 | b. | $946.30 | c. | $969.96 | d. | $994.21 | e. | $1,019.06 |
A 6- Projected free cash flows should be discounted at the firm's weighted average cost of capital to find the value of its operations. a. Trueb. Falsea 7- A stock just paid a dividend of D0 = $1.50. The required rate of return is rs = 10.1%, and the constant growth rate is g = 4.0%. What is the current stock price?a. $23.11b. $23.70c. $24.31d. $24.93e. $25.57e 8- Ratio analysis involves analyzing financial statements in order to appraise a firm's financial position and strength. | | | a. | True | b. | FalseA | 9- Profitability ratios show the combined effects of liquidity, asset management, and debt management on operating results. | | | a. | True | b. | False |
A 10 - One problem with ratio analysis is that relationships can be manipulated. For example, if our current ratio is
b. False
b
2- How much would $1, growing at 3.5% per year, be worth after 75 years? a. $12.54 b. $13.20 c. $13.86 d. $14.55 e. $15.28 b 3- How much would $20,000 due in 50 years be worth today if the discount rate were 7.5%? a. $438.03 b. $461.08 c. $485.35 d. $510.89 e. $537.78 e 4- Suppose the U.S. Treasury offers to sell you a bond for $3,000. No payments will be made until the bond matures 10 years from now, at which time it will be redeemed for $5,000. What interest rate would you earn if you bought this bond at the offer price? a. 3.82% b. 4.25% c. 4.72% d. 5.24% e. 5.77% d 5- The Morrissey Company's bonds mature in 7 years, have a par value of $1,000, and make an annual coupon payment of $70. The market interest rate for the bonds is 8.5%. What is the bond's price? | | | a. | $923.22 | b. | $946.30 | c. | $969.96 | d. | $994.21 | e. | $1,019.06 |
A 6- Projected free cash flows should be discounted at the firm's weighted average cost of capital to find the value of its operations. a. Trueb. Falsea 7- A stock just paid a dividend of D0 = $1.50. The required rate of return is rs = 10.1%, and the constant growth rate is g = 4.0%. What is the current stock price?a. $23.11b. $23.70c. $24.31d. $24.93e. $25.57e 8- Ratio analysis involves analyzing financial statements in order to appraise a firm's financial position and strength. | | | a. | True | b. | FalseA | 9- Profitability ratios show the combined effects of liquidity, asset management, and debt management on operating results. | | | a. | True | b. | False |
A 10 - One problem with ratio analysis is that relationships can be manipulated. For example, if our current ratio is