Print First Name:

ID Number:

COURSE

FINANCE

NUMBER

COMM 308

SECTIONS: ( Circle your section)

AA, AB

DATE

EXAMINATION

June 18, 2012

Final Exam

VERSION BLUE

INSTRUCTOR:

( Underline your instructor’s name)

Rahul Ravi

Jay Mannadiar

# OF PAGES 17

TIME

Including cover

3 hours

19:00 to 22:00

DIVISION

John Molson School of Business

Concordia University

READ THESE SPECIAL INSTRUCTIONS CAREFULLY

‐ You must submit a BLUE computer answer sheet.

‐ You are allowed to bring/use one or more calculators

‐ You are allowed to bring one language dictionary (no finance/ mathematics/economics etc. dictionary)

‐ For Multiple Choice Questions: All answers must be recorded IN PENCIL on the computer sheet.

‐ For Problems:

All answers must be recorded IN INK within this exam. Show your calculations to earn part marks. Write in the space provided. If you are using the back of the exam for answering any question, you should label it clearly

‐ Please ensure you have 17 pages (including the cover page) in this exam.

‐ Fill in your name and other required information IN PENCIL on the Computer Answer sheet as well as IN INK on this cover sheet.

‐ Blank questions or those with multiple answers will not receive any credit. SCORES (FOR INTERNAL USE ONLY)

Part I

Multiple Choice

Questions

(Max: 70 Points)

Blue Version

Part II

Long Answer Questions

Question 1

Question 2

Question 3

Question 4

(Max: 8 Points)

(Max: 6 Points)

(Max: 8 Points)

(Max: 8 Points)

Page 1 of 17

Total

Part I: Multiple Choice Questions (28 Questions, 70 Points Total):

- This part consists of 28 Multiple Choice Questions.

- Each question counts 2.5 points for a total of 70 points.

- Only answers on the computer answer sheet will be graded.

- Use a pencil to mark your answers on the Computer Sheet.

1. Which one of the following is the best strategy to help reduce the agency problem? A) Fixed salaries for all corporate executives

B) Executive bonuses based on increased sales

C) Stock options used as management compensation

D) Management promotions based on the number of employees managed E) Raises based on the value of the assets managed

2. If you place $50 in a savings account with an interest rate of 7% APR compounded weekly, what will the investment be worth at the end of five years (round to nearest dollar)? (Assume that there are 52 weeks in a year)

A)

$72

B)

$70

C)

$71

D)

$57

E)

$45,000

3. You are considering two investments: A & B. Both investments provide a cash flow of $100 per year for n years. However, investment A receives the cash flows at the beginning of each year, while investment B receives the cash flows at the end of each year. If the present value of cash flows from investment A is P, and the discount rate is r, what is the Future value at time n of the cash flows from investment B?

A)

P

B)

P

C)

D)

E)

Blue Version

(1 + r )

(1+ r )n

n

P (1+ r )

n+1

P (1 + r )

n1

P (1+ r )

Page 2 of 17

4. What is the value on 1/1/2005 of the following cash flows (Assume 10% EAR discount rate) Date Cash received

Amount of Cash

01/01/2006

$100

01/01/2008

$100

01/01/2010

$100

01/01/2012

$100

01/01/2014

$100

A)

$266.00

B)

$292.60

C)

$321.86

D)

$379.08

E)

$416.99

5. You are going to deposit $800 into an account at the beginning of each year for the next 20 years (First payment is today). Starting in year 20, you will begin receiving perpetuity from the account. First payment from the perpetuity will be at the end of year 20. If the account pays 14% (EAR), how much will you receive in each year from this perpetuity? A)

B)

C)

D)

E)

$10,194.79

$11,622.06

$13,249.15

$94,636.80

$592,962.39

6. Which of the following provides the greatest annual interest? A)

B)

C)

D)...