Given the following cash flows, calculate the payback period…

Question 1

Given the following cash flows, calculate the
payback period:

Year

CF

0

-921

1

368

2

253

3

291

4

784

a.
3.0115

b.
3

c.
2.0125

d.
4.5209

1 points

Question 2

A bond is currently selling for $1,087. If the
yield to maturity is 10%, the coupon rate will be:

a.
less than 10%.

b.
equal than 10%.

c.
more than 10%.

d.
None above

1 points

Question 3

A bond that sells for less than face value is
called as:

a.
discount bond

b.
premium bond

c.
par value bond

d.
debenture

e.
perpetuity

1 points

Question 4

Suppose the real rate is 9.83% and the inflation
rate is 4.65%. Solve for the nominal rate.

a.
11.32%

b.
12.87%

c.
14.93%

d.
21.74%
e. 14.48

1 points

Question 5

The ABC Co. has $1,000 face value bond
outstanding with a market price of $937.6. The bond pays interest annually,
matures in 9 years, and has a yield to maturity of 10.7 percent. What is the
current yield?

a.
5.11%

b.
10.22%

c.
7.34%

d.
14.94%

1 points

Question 6

What is the net present value of the following
cash flows? Assume an interest rate of 3.5%

Year

CF

0

-$11,895

1

$7,722

2

$5,687

3

$5,120

a.
$5,492.69

b.
$17,387.92

c.
$6,247.34

d.
$8,235.81

1 points

Question 7

Suppose an investment offers to double your
money in 39 years. What annual rate of return are you being offered if interest
is compounded semi-annually?

a.
1.79%

b.
1.56%

c.
0.98%

d.
0.89%

1 points

Question 8

A 8.9 percent $1,000 bond matures in 17 years,
pays interest semiannually, and has a yield to maturity of 16.02 percent. What
is the current market price of the bond?

a.
$587.92

b.
$456.23

c.
$143.24

d.
$693.22

1 points

Question 9

A cost that has already been incurred and cannot
be recouped is called as a(n):

a.
sunk cost

b.
financial cost

c.
opportunity cost

d.
side cost

e.
relevant cost

1 points

Question 10

A project has the following cash flows. What is
the internal rate of return?

Year 0 1 2 3

Cash flow -$121,000 68,150 $42,200 $39,100

a.
12.71%

b.
14.39%

c.
13.47%

d.
13.85%

e.
14.82%

1 points

Question 11

Uptown Insurance offers an annuity due with
semi-annual payments for 19 years at 4.9 percent interest. The annuity costs
$176,239 today. What is the amount of each annuity payment?

a.
$7,008.06

b.
$5,670.26

c.
$8,300.23

d.
$4,607.98

1 points

Question 12

ABC Corp. just paid a dividend of $2.4 per share
at the end of the year. The stock has a required rate of return is 18%. The dividend
is expected to grow at 6.9%. What is dividend at time = 8? (solve for D8?)

a.
$7.667

b.
$3.175

c.
$6.451

d.
$4.093

1 points

Question 13

The principal amount of a bond that is repaid at
the end of term is called the par value or the:

a.
call premium

b.
perpetuity value

c.
face value

d.
back-end value

e.
coupon value

1 points

Question 14

How many years will it take to quadruple (i.e. 4
times) your money at 9% compounded quarterly?

a.
7.2424

b.
15.5759

c.
5.6478

d.
3.3168

1 points
Question 15

An investment is acceptable if the profitability
index (PI) of the investment is:

a.
less than the net present value (NPV).

b.
less than one.

c.
greater than one.

d.
greater than the internal rate of return (IRR).

e.
greater than a pre-specified rate of return.

1 points

Question 16

Suppose that today’s stock price is $49.8. If
the required rate on equity is 18.6% and the growth rate is 7.9%, compute the
expected dividend (i.e. compute D1)

a.
$7.2447

b.
$10.6483

c.
$5.3286

d.
$2.5643

1 points

Question 17

The common stock of ABC Industries is valued at
$49 a share. The company increases their dividend by 3.1 percent annually and
expects their next dividend to be $1.84. What is the required rate of return on
this stock?

a.
2.82%

b.
3.61%

c.
4.87%

d.
6.86%

1 points

Question 18

ABC is reviewing a project that will cost
$1,431.The project will produce cash flows $210 at the end of each year for the
first two years and $772 at the end of each year for the next two years. What
is the profitability index? Assume interest rate is 4%.

a.
1.56

b.
0.95

c.
1.22

d.
2.56

1 points

Question 19

ABC’s last dividend paid was $4.4, its required
return is 13%, its growth rate is 6%, and its growth rate is expected to be
constant in the future. What is ABC’s expected stock price in 19 years?

a.
$104.37

b.
$201.59

c.
$98.15

d.
$120.31

1 points

Question 20

A stock just paid a dividend of D0 = $3.4. The
required rate of return is rs = 15.8%, and the constant growth rate is g = 3%.
What is the current stock price?

a.
$35.76

b.
$24.469

c.
$3.4
d.
$27.359