fin300 practice

Pages: 29 (2011 words) Published: November 11, 2013
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1.
Poor Dog, Inc. borrowed \$135,000 from the bank today. They must repay this money over the next six years by making monthly payments of \$2,215.10. What is the interest rate on the loan? Express your answer with annual compounding. A)

5.98%
B)
6.63%
C)
4.71%
D)
5.65%
E)
5.80%

2.
How much would you pay for a security that pays you \$500 every 4 months for the next 10 years if you require a return of 8% per year compounded monthly? A)
\$11,228.48
B)
\$15,000.00
C)
\$10,260.00
D)
\$13,724.90
E)
\$10,200.23

3.
You can earn 5% per year compounded annually for the next 4 years, followed by 8% per year compounded quarterly for 5 years. What is the average annual compounded rate of return over the 9 year period? Express your answer with monthly compounding. A)

B)
6.82%
C)
6.97%
D)
6.43%
E)
6.59%

4.
You have just purchased a house for \$540,000 with a \$200,000 down payment. You are going to get a mortgage at the TF bank for the balance. TF is charging a rate of 5.8% per year compounded semi-annually on 5 year term mortgages. You want to make weekly payments amortized over 20 years. What is your weekly payment? A)

\$877.60
B)
\$549.01
C)
\$545.47
D)

E)
\$871.92

5.
Master Meter is planning on constructing a new \$20 million facility. The company plans to pay 20% of the cost in cash and finance the balance. How much will each monthly loan payment be if they can borrow the necessary funds for 30 years at 9% per year compounded semi-annually? A)

\$128,740
B)
\$158,567
C)
\$160,925
D)
\$141,982
E)
\$126,853

6.
Gerry Industries has some 8% (per year compounded semi-annually) coupon bonds on the market that are selling at \$989, pay interest semi-annually, and mature in fifteen years. The company would like to issue \$1 million in new fifteen-year bonds. What coupon rate should be applied to the new bonds if Gerry Industries wants to sell them at par? Express your answer with semi-annual compounding. A)

8.00%
B)
8.33%
C)
7.87%
D)
8.13%
E)
8.26%

7.
You have decided to save \$30 a week for the next three years as an emergency fund. You can earn 3.5 % per year compounded weekly. How much would you have to deposit in one lump sum today to have the same amount in your savings at the end of three years? A)

\$4,441.26
B)
\$4,382.74
C)
\$4,288.87
D)
\$4,305.19
E)
\$4,414.14

8.
A credit card company charges you an interest rate of 1.25% per month. The annual percentage rate is ____ and the effective annual rate is _______. A)
15.00%; 16.08%
B)
16.08%; 15.00%
C)
15.00%; 15.00%
D)
15.00%; 14.55%
E)
14.55%; 15.00%

9.
The Friendly Bank wants to earn an effective annual rate of 9% on its auto loans. If interest is compounded monthly, what APR must they charge? A)
8.65%
B)
9.17%
C)
8.58%
D)
9.38%
E)
8.44%

Use the following to answer question 11:

Rondolo, Inc.
2006 Income Statement
Net Sales
\$12,800
Less: Cost of Goods Sold
10,400
Less: Depreciation
680
Earnings Before Interest and Taxes
1,720
Less: Interest Paid
280
Taxable Income
\$1,440
Less: Taxes
500
Net Income
\$940
Dividends
\$423
Additions to retained earnings
\$517

Rondolo, Inc.
2006 Balance Sheet
Cash

\$520

Accounts payable

\$1,810
Accounts rec

1,080

Long-term debt

3,600
Inventory

3,120

Common stock

5,000
Total

\$4,720

Retained earnings

1,790
Net fixed assets

7,480

Total assets

\$12,200

Total liabilities & equity

\$12,200

10.
Rondolo, Inc. is currently operating at maximum capacity. All costs, assets, and current liabilities vary directly with sales. The tax rate and the dividend payout ratio will remain constant. How much additional debt is required if no new equity is raised and sales are projected to increase by 4 percent? A)

-\$122.08
B)
\$598.75
C)
\$416.00
D)
-\$562.50
E)
\$318.01

11.
Your...

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