1. Tim has been promoted and is now in charge of all fixed asset purchases. In other words, Tim is in charge
   of:
   A. capital structure management.
   B. asset allocation.
   C. risk management.
   D. capital budgeting.
   E. working capital management.
   2. Stadford, Inc. is financed with 40 percent debt and 60 percent equity. This mixture of debt and equity is
   referred to as the firm’s:
   A. capital structure.
   B. capital budget.
   C. asset allocation.
   D. working capital.
   E. risk structure.
   3. Lester’s BBQ has $121,000 in current assets and $109,000 in current liabilities. These values as referred
   to as the firm’s:
   A. capital structure.
   B. cash equivalents.
   C. working capital.
   D. net assets.
   E. fixed accounts.
   4. Margie opened a used book store and is both the 100 percent owner and the store’s manager. Which type
   of business entity does Margie own if she is personally liable for all the store’s debts?
   A. Sole proprietorship
   B. Limited partnership
   C. Corporation
   D. Joint stock company
   E. General partnership
   5. Will and Bill both enjoy sunshine, water, and surfboards. Thus, the two friends decided to create a
   business together renting surfboards, paddle boats, and inflatable devices in California. Will and Bill will
   equally share in the decision making and in the profits or losses. Which type of business did they create if
   they both have full personal liability for the firm’s debts?
   A. Sole proprietorship
   B. Limited partnership
   C. Corporation
   D. Joint stock company
   E. General partnership
   6. Todd and Cathy created a firm that is a separate legal entity and will share ownership of that firm on a 50/
   50 basis. Which type of entity did they create if they have no personal liability for the firm’s debts?
   A. Limited partnership
   B. Corporation
   C. Sole proprietorship
   D. General partnership
   E. Public company
   7. The potential conflict of interest between a firm’s owners and its managers is referred to as which type of
   conflict?
   A. Organizational
   B. Structure
   C. Formation
   D. Agency
   E. Territorial
   8. The federal government has a tax claim on the cash flows of The Window Store. This claim is defined as
   a claim by one of the firm’s:
   A. residual owners.
   B. shareholders.
   C. financiers.
   D. provisional partners.
   E. stakeholders.
   9. The “Say on Pay” bill requires corporations to do which one of the following?
   A. Give the chairman of the board the final say on executive pay
   B. Give the firm’s creditors a nonbinding say on executive pay
   C. Give the firm’s creditors a binding say on executive pay
   D. Give shareholders a nonbinding vote on executive pay
   E. Give shareholders a binding vote on executive pay
   10. In 2009, the Obama administration established a maximum limit on executive salaries for firms that
   received bailout funds. What was the amount of that salary limit?
   A. $250,000
   B. $500,000
   C. $750,000
   D. $1,000,000
   E. $1,500,000
   11. Jamie is employed as a commercial loan officer for a regional bank centered in the Midwestern section of
   the U.S. Her job falls into which one of the following areas of finance?
   A. International finance
   B. Financial institutions
   C. Corporate finance
   D. Capital management
   E. Investments
   12. If you accept a job as a domestic security analyst for a brokerage firm, you are most likely working in
   which one of the following financial areas?
   A. international finance
   B. private placements
   C. corporate finance
   D. capital management
   E. investments
   13. Which one of the following occupations best fits into the international area of finance?
   A. Bank teller
   B. Treasury bill analyst
   C. Currency trader
   D. Insurance risk manager
   E. Local bank manager
   14. Which of the following individuals commonly use finance in the course of their job?
   I. Chief financial officers
   II. Accountants
   III. Security analysts
   IV. Strategic managers
   A. I and II only
   B. III and IV only
   C. I and III only
   D. I, II, and III only
   E. I, II, III, and IV
   15. Which one of the following functions should be assigned to the treasurer rather than the controller?
   A. Data processing
   B. Cost accounting
   C. Tax management
   D. Cash management
   E. Financial accounting
   16. Which one of the following correctly defines a common chain of command within a corporation?
   A. The controller reports directly to corporate treasurer.
   B. The treasurer reports directly to the board of directors.
   C. The chief financial officer reports directly to the board of directors.
   D. The credit manager reports directly to the controller.
   E. The controller reports directly to the chief financial officer.
   17. Capital budgeting includes the evaluation of which of the following?
   A. Size of future cash flows only
   B. Size and timing of future cash flows only
   C. Timing and risk of future cash flows only
   D. Risk and size of future cash flows only
   E. Size, timing, and risk of future cash flows
   18. Which one of the following is a working capital decision?
   A. How should the firm raise additional capital to fund its expansion?
   B. What debt-equity ratio is best suited to our firm?
   C. What is the cost of debt financing?
   D. Which type of debt is best suited to finance our inventory?
   E. How much cash should the firm keep in reserve?
   19. Which one of the following is a capital structure decision?
   A. Determining the optimal inventory level
   B. Establishing the preferred debt-equity level
   C. Selecting new equipment to purchase
   D. Setting the terms of sale for credit sales
   E. Determining when suppliers should be paid
   20. Working capital management includes which one of the following?
   A. Deciding which new projects to accept
   B. Deciding whether to purchase a new machine or fix a current machine
   C. Determining which customers will be granted credit
   D. Determining how many new shares of stock should be issued
   E. Establishing the target debt-equity ratio
   21. The daily financial operations of a firm are primarily controlled by managing the:
   A. total debt level.
   B. working capital.
   C. capital structure.
   D. capital budget.
   E. long-term liabilities.
   22. A sole proprietorship:
   A. provides limited liability for its owner.
   B. involves significant legal costs during the formation process.
   C. has an unlimited life.
   D. has its profits taxed as personal income.
   E. can generally raise significant capital from non-owner sources.
   23. Which one of the following forms of business organization offers liability protection to some of its
   owners but not to all of its owners?
   A. Sole proprietorship
   B. General partnership
   C. Limited partnership
   D. Limited liability company
   E. Corporation
   24. Maria is the sole proprietor of an antique store which she has operated at the same location for the past
   16 years. The store rents the space in which it is located but does own all of the inventory and fixtures.
   The store has an outstanding loan with the local bank but no other debt obligations. There are no specific
   loan covenants or assets pledged as security for the loan. Due to a sudden and unexpected downturn in the
   economy, the store is unable to generate sufficient funds to pay the loan payments due to the bank. Which
   of the following options does the bank have to collect the money it is owed?
   I. Sell the inventory and use the cash raised to apply to the debt
   II. Sell the store fixtures and use the cash raised to apply to the debt
   III. Take funds from Maria’s personal account at the bank to pay the store’s debt
   IV. Sell any assets Maria personally owns and apply the proceeds to the store’s debt
   A. I only
   B. III only
   C. I and II only
   D. I, II, and III only
   E. I, II, III, and IV
   25. Which one of the following statements correctly applies to a sole proprietorship?
   A. The business entity has an unlimited life.
   B. The ownership can easily be transferred to another individual.
   C. The owner enjoys limited liability for the firm’s debts.
   D. Debt financing is easy to arrange in the firm’s name.
   E. Obtaining additional equity is dependent on the owner’s personal finances.
   26. Which one of the following applies to a general partnership?
   A. The firm’s operations must be controlled by a single partner.
   B. Any one of the partners can be held solely liable for all of the partnership’s debt.
   C. The profits of the firm are taxed as a separate entity.
   D. Each partner’s liability for the firm’s debts is limited to each partner’s investment in the firm.
   E. The profits of a general partnership are taxed the same as those of a corporation.
   27. In a general partnership, each partner is personally liable for:
   A. the partnership debts that he or she created.
   B. his or her proportionate share of all partnership debts regardless of which partner incurred that debt.
   C. the total debts of the partnership, even if he or she was unaware of those debts.
   D. the debts of the partnership up to the amount he or she invested in the firm.
   E.
   all personal and partnership debts incurred by any partner, even if he or she was unaware of those
   debts.
   28. Which one of the following is an advantage of being a limited partner?
   A. Non-taxable share of any profits
   B. Control over the daily operations of the firm
   C. Losses limited to capital invested
   D. Unlimited profits without risk of incurring a loss
   E. Active market for ownership interest
   29. Which one of the following statements about a limited partnership is correct?
   A. All partners have their losses limited to their capital investment in the partnership.
   B. All partners are treated equally.
   C. There must be at least one general partner.
   D. Equity financing is easy to obtain and unlimited.
   E. Any partner can transfer his or her ownership interest without ending the partnership.
   30. A corporation:
   A. is ultimately controlled by its board of directors.
   B. is a legal entity separate from its owners.
   C. is prohibited from entering into contractual agreements.
   D. has its identity defined by its bylaws.
   E. has its existence regulated by the rules set forth in its charter.
   31. Which one of the following is contained in the corporate bylaws?
   A. Procedures for electing corporate directors
   B. State of incorporation
   C. Number of authorized shares
   D. Intended life of the corporation
   E. Business purpose of the corporation
   32. Which of the following are advantages of the corporate form of organization?
   I. Ability to raise large sums of equity capital
   II. Ease of ownership transfer
   III. Profits taxed at the corporate level
   IV. Limited liability for all owners
   A. I and II only
   B. III and IV only
   C. II, III, and IV only
   D. I, II, and IV only
   E. I, II, III, and IV
   33. Corporate shareholders:
   A. are proportionately liable for the firm’s debts.
   B. are protected from all losses.
   C. have the ability to change the corporation’s bylaws.
   D. receive tax-free distributions since all profits are taxed at the corporate level.
   E. have basically no control over the actual corporation.
   34. A limited liability company:
   A. is a hybrid between a sole proprietorship and a partnership.
   B. prefers its profits be taxed as personal income to its owners.
   C. that meets the IRS criteria to be an LLC will be taxed like a corporation.
   D. provides limited liability for some, but not all, of its owners.
   E. cannot be created for professional service firms, such as accountants and attorneys.
   35. Limited liability companies are primarily designed to:
   A.
   allow a portion of its owners to enjoy limited liability while granting the other portion of its owners
   control over the entity.
   B. provide the benefits of the corporate structure to foreign-based entities.
   C. spin-off a wholly-owned subsidiary.
   D. allow companies to reorganize themselves through the bankruptcy process.
   E. provide limited liability while avoiding double taxation.
   36. The primary goal of financial management is to maximize which one of the following for a corporation?
   A. Current profits
   B. Market share
   C. Number of shares outstanding
   D. Market value of existing stock
   E. Revenue growth
   37. Which one of the following best matches the primary goal of financial management?
   A. Increasing the dollar amount of each sale
   B. Increasing traffic flow within the firm’s stores
   C. Transforming fixed costs into variable costs
   D. Increasing the firm’s liquidity
   E. Increasing the market value of firm
   38. The goal of financial management is to increase the:
   A. future value of the firm’s total equity.
   B. book value of equity.
   C. dividends paid per share.
   D. current market value per share.
   E. number of shares outstanding.
   39. What is the goal of financial management for a sole proprietorship?
   A. Maximize net income given the current resources of the firm
   B. Decrease long-term debt to reduce the risk to the owner
   C. Minimize the tax impact on the proprietor
   D. Maximize the market value of the equity
   E. Minimize the reliance on fixed costs
   40. The Sarbanes-Oxley Act in 2002 was prompted by which one of the following from the 1990’s?
   A. Increased stock market volatility
   B. Corporate accounting and financial fraud
   C. Increased executive compensation
   D. Increased foreign investment in U.S. stock markets
   E. Increased use of tax loopholes
   41. The Sarbanes-Oxley Act of 2002 has:
   A. reduced the annual compliance costs of all publicly traded firms in the U.S.
   B. decreased senior management’s involvement in the corporate annual report.
   C. greatly increased the number of U.S. firms that are going public for the first time.
   D. decreased the number of U.S. firms going public on foreign exchanges.
   E. made officers of publicly traded firms personally responsible for the firm’s financial statements.
   42. Which one of the following best describes the primary intent of the Sarbanes-Oxley Act of 2002?
   A. Increase the costs of going public
   B. Increase protection against corporate fraud
   C. Limit secondary issues of corporate securities
   D. Decrease the number of publicly traded firms
   E. Increase the number of firms that “go dark”
   43. The Sarbanes-Oxley Act:
   A. makes the officers of a public corporation personally responsible for the firm’s financial statements.
   B. requires all corporations to fully disclose its financial dealings to the general public.
   C. places the responsibility for a firm’s financial statements solely on the chief financial officer.
   D. requires that the board of directors be solely responsible for the firm’s financial dealings.
   E.
   places total responsibility for the financial statements of a firm on the auditor who certifies the
   statements.
   44. Which one of the following situations is most apt to create an agency conflict?
   A. Compensating a manager based on his or her division’s net income
   B. Giving all employees a bonus if a certain level of efficiency is maintained
   C. Hiring an independent consultant to study the operating efficiency of the firm
   D. Rejecting a profitable project to protect employee jobs
   E. Selling an underproducing segment of the firm
   45. Which one of the following is most apt to create a situation where an agency conflict could arise?
   A. Increasing the size of a firm’s operations
   B. Downsizing a firm
   C. Separating management from ownership
   D. Decreasing employee turnover
   E. Reducing both management and non-management salaries
   46. Which one of the following is most apt to align management’s priorities with shareholders’ interests?
   A. Increasing employee retirement benefits
   B.
   Compensating managers with shares of stock that must be held for 3 years before the shares can be
   sold
   C.
   Allowing a manager to decorate his or her own office once he or she has been in that office for a period
   of 3 years or more
   D. Increasing the number of paid holidays that long-term employees are entitled to receive
   E. Allowing employees to retire early with full retirement benefits
   47. Which of the following are effective means of aligning management goals with shareholder interests?
   I. Employee stock options
   II. Threat of a takeover
   III. Management bonuses tied to performance goals
   IV. Threat of a proxy fight
   A. I and III only
   B. II and IV only
   C. I, II, and III only
   D. I, III, and IV only
   E. I, II, III, and IV
   48. Marti had an unexpected surprise when she ate her Lotsa Good cereal this morning. She found a piece of
   metal mixed in her cereal. The potential claim which Marti has against this firm is that of a(n):
   A. general creditor.
   B. debtholder.
   C. shareholder.
   D. stakeholder.
   E. agent.
   49. Which one of the following transactions occurred in the primary market?
   A. Maria gave 100 shares of Alto stock to her best friend.
   B. Gene purchased 300 shares of Alto stock from Ted.
   C. South Wind Products sold 1,000 shares of newly issued stock to Mike.
   D. Terry sold 3,000 shares of Uno stock to his brother.
   E. The president of Trecco, Inc. sold 500 shares of Trecco stock to his son.
   50. Valerie bought 200 shares of Able stock today. Able stock has been trading for some time on the NYSE.
   Valerie’s purchase occurred in which market?
   A. Dealer market
   B. Over-the-counter market
   C. Secondary market
   D. Primary market
   E. Tertiary market
   51. Which one of the following statements is correct?
   A. All secondary markets are dealer markets.
   B. All secondary markets are broker markets.
   C. All stock trades between existing shareholders are secondary market transactions.
   D. All stock transactions are secondary market transactions.
   E. All Dutch auction sales are secondary market transactions.
   52. Ted currently owns 100 shares of a publicly traded stock which he would like to sell. Which one of the
   following provides the most efficient means for Ted to sell his shares?
   A. Issuer sponsored Dutch auction
   B. Proxy statement
   C. Private placement transaction
   D. Stakeholder purchase
   E. Secondary market transaction
   53. Which one of the following parties can sell shares of ABC stock in the primary market?
   A. ABC company
   B. Any corporation, other than the ABC company
   C. Institutional shareholder
   D. Private individual shareholder
   E. Any of the above
   54. Which one of the following statements related to securities dealers is correct?
   A. Dealers match buyers with sellers.
   B. Dealers buy and sell from their own inventory.
   C. Dealers operate on a physical trading floor.
   D. Dealers operate exclusively in auction markets.
   E. Dealers are limited to trading non-listed stocks.
   55. An auction market:
   A. is an electronic means of exchanging securities.
   B. has a physical trading floor.
   C. handles primary market transactions exclusively.
   D. is also referred to as an OTC market.
   E. is dealer based.
   56. Which one of the following statements is correct?
   A. NASDAQ has more listed stocks than does the NYSE.
   B. The NYSE is a dealer market.
   C. NASDAQ is an auction market.
   D. NASDAQ has the most stringent listing requirements of any U.S. exchange.
   E. The trading floor for NASDAQ is located in Chicago.
   57. Which one of the following is a general characteristic of a securities broker?
   A. Trades from his or her own inventory
   B. Trades only foreign securities
   C. Trades listed securities in an auction market
   D. Trades electronically from any geographic location
   E. Is the principal trader of debt securities
   58. Which one of the following statements is correct?
   A. All of the major stock exchanges are U.S. based.
   B. The NYSE was created by the National Association of Securities Dealers in the early 1970’s.
   C. The American Stock Exchange is a dealer market.
   D. OTC markets have a physical trading floor generally located in either New York City or Chicago.
   E. The primary purpose of the NYSE is to match buyers with sellers.

INDIVIDUAL PROJECT (Publicly traded company valuation)

1. The objectives of this project are to:
   1. enable you to do a comprehensive financial analysis of a publicly traded corporation; and
   2. provide you with substantial  information for you to make recommendations regarding investing in this corporation. That is, you must answer the question: “Should I buy this stock?” or, “Should I sell this stock?”
2. The midterm and final report must be written properly.
   1. They must include a title page, a table of contents, and a reference page
   2. For both midterm and final report, information sources from the web, etc. must be cited properly, using APA style.
      1.                                                                           i.      This means that every table that you cut and pasted or typed from the web must have a source at the bottom of the table AND that citing must also be included in a reference page at the end of the report.
      2.                                                                         ii.      Formatting will be graded.
3. The parts of the report are discussed below. The midterm report (parts a through c) is due in Week 5.  The complete report (parts a through g) is due in Week 5. Your project should include:
   1. An overview of the corporation.  (one page)
      1.                                                                           i.      Provide general information regarding the type of business, products and/or services, location of headquarters, name of CEO, number of employees, and countries of operation, etc.
   2. The latest financial statements (no more than three pages, be sure to have three years financials) i.e., one for income, balance sheet and cash flow.
      1.                                                                           i.      Get the income statement, balance sheet, cash flow statement, and the statement of owners’ equity for the past three (3) fiscal year-ends. Cut and paste them in your report. Do not forget to cite the source under each statement.
      2.                                                                         ii.      If you cannot cut and paste the statements, save in pdf and then paste.
   3. A summary of each financial statement FOR THE INCOME STATEMENT, THE BALANCE SHEET AND THE CASH FLOW STATEMENT

1.                                                                           i.      Use a header for “Income Statement Commentary”

1. Tell a story from each of the financial statements.  For example, for the income statement, the story starts like, “Total Revenues in 2010 were $10 billion, while Cost of Goods Sold were $8 billion, leaving a gross profit margin of $2 billion, or 20 percent of total revenues….After taking out interest and taxes from EBIT, the net income was $0.5 billion, or 5 percent of total revenues.”  Discuss here the changes over the three years: gross profit margin, operating margin and net income margins. Have they all changed, remained the same, declined, improved, etc. The ROA and ROE improved, declined etc. You can discuss by what % for example

1.                                                                         ii.      Use a header for “Balance Sheet Commentary”.
   1. The same with the balance sheet using b/s ratios, the balance sheet improved, declined stayed the same? Supported by liquidity ratios, leverage ratios, asset turnover ratios,

1.                                                                       iii.      Use a header for “Cash Flow Commentary”.
   1. Be sure to total the three years cash flows from operations, financing, investing
   2. Sum the three years cash flow in each of the three categories and comment on where the firm generated cash and used cash, as well as financed the business.

1.                                                                       iv.      You will use your text to find the ratios (five major types of ratios, See Chapter 3). Ratio calculations are to be integrated into the commentaries above (i., ii. & iii.). No commentary on each ratio please, i.e., you do not need to describe how the ratio is calculated. Place your calculations in the appendix. Calculate the ratios from the financial statements in this part c using Excel or your calculator.

1. Discuss stock valuation using the dividend discount model and the free cash flow method with terminal valuation methods.

1.                                                                           i.      Calculate the dividend growth rate for your company using time value of money tools (use annual dividend payments). Then using the Gordon Constant Dividend growth formula find the value of the firm’s stock and compare to current valuation, i.e. the fiscal year end stock price. Discuss if the stock is over or undervalued based on your calculation compared to you constant growth model valuation.

1.                                                                         ii.      To use the constant growth model you will need the required return for the company. You will find the required return on equity using the CAPM. Assume the risk free rate is 3.6%, and the Expected return of the market is 11%. You will use the CAPM required return found here in #e below.

1. Calculate the Free Cash Flow for your company for the three annual years’ financials. Calculate forward three years of FCF growth based on the growth for the past three years, and then assume that FCF will grow thereafter at 5% to find the terminal value in year three projection.

1.                                                                           i.      Find the discounted value of the firm (i.e. this is the entity value).

1.                                                                         ii.      You will need to calculate the WACC for the firm to calculate the discounted cash flow. Be sure to use the cost of debt for only borrowed money in the WACC calculation, and remember to calculate the capital structure percentages based only on debt, equity & preferred stock, if in your company has preferred.  No current liabilities (other than Notes payable) are included in the capital structure. Find the forward cap structure: i.e. the % debt, % preferred stock and % equity. These weights are used in the WACC.

1.                                                                       iii.      Follow the methodology in your text book about the entity valuation of the firm and equity valuation. (e.g., you will subtract from the entity value the firm and subtract value of borrowed- money debt). This subtraction will give you the value of equity. Now calculate the per share value of the FCF valuation by dividing the equity value by the number of shares outstanding. Assume neither changes in the shares outstanding nor equity issuance for the future.

1.                                                                       iv.      Compare your FCF valuation of equity per share to the market value per share (at fiscal yearend) and discuss why they may be different? Discuss whether your company is over or undervalued relative to your calculations.

1.  Considering the firms’ history of capital expenditures and shareholders’ wants, what is your recommendation for the firm’s dividend policy? Use charts of dividends and share repurchases and debt or equity issuances to justify a policy.

1. Summary and recommendation regarding the future of this stock.
   1.                                                                           i.      Based on your analysis,  including the over or undervaluation:
      1. Is the stock a good buy, average buy, or a poor buy (implying a good sell)?
      2. Include a justification of your recommendation based on your analysis and research.

Do not use equity research in your paper; include only your research in the paper.

BONDS

Some terms to know:

Par value = Future Value=: $1000 most text books or $100 (real world).
Coupon Rate= Interest rate used to calculate payment (annuity)
bond Payment = coupon rate * par value
Payment could be made semi-annually, quarterly, monthly, bi-weekly, annually, daily (no very common).
Premium Bonds = Bond is priced over par (think expensive)
Discount Bond= Bond is priced below par
Yield to Maturity = Interest Rate if bond goes to Maturity
Yield to Call = Interest Rate if bond is called or does not reach maturity
Call Price = Price at which bond is called.
Price of bond (Po) = Price of Bond today or Present Value (PV)
Future value of bond = Generally will be Par value of $100 or $1000 (depending on text)
Nper or N = Periods till maturity or call

Bond is a form of annuity.
An annuity is just a constant (fixed) stream of payment for a fixed period or perpetuity.

Annuity Due = Payment made at the beginning (for example your fixed mortgage payment at the beginning of each month could be considered an annuity due if that helps).
Ordinary Annuity= Payment made at the end of term.

Zero coupon bond = zero coupon rate = zero payment

You may use your Excel or Financial Calculator to assist with Bond type questions.
Sample Problems.

1.The 13.77 percent coupon bonds of the Peterson Co. are selling for $834.41. The bonds mature in 5 years and pay interest semi-annually. These bonds have current yield of _____ percent.

2.You paid $1,128 for a corporate bond that has a 6.64% coupon rate. What is the current yield?
3. The yield to maturity on a Marshall Co. premium bond is 7.6 percent. This is the:
a) nominal rate.
b) effective rate.
c) real rate.
d) current yield.

4. ABC has issued a bond with the following characteristics:
Par: $1,000; Time to maturity: 8 years; Coupon rate: 4%;
Assume semi-annual coupon payments. Calculate the price of this bond if the YTM is 6.92%

5. ABC has issued a bond with the following characteristics:
Par: $1,000; Time to maturity: 16 years; Coupon rate: 4%;
Assume semi-annual coupon payments. Calculate the price of this bond if the YTM is 9.64%

6. A premium bond is a bond that:
a) has a market price which exceeds the face value.
b) has a face value in excess of $1,000.
c) is selling for less than par value.
d) has a par value which exceeds the face value.
e) is callable within 12 months or less.

7. ABC wants to issue 8-year, zero coupon bonds that yield 11.64 percent. What price should they charge for these bonds if they have a par value of $1,000? That is, solve for PV. Assume annual compounding.
Hint: zero coupon bonds means PMT = 0

8. The 8 percent coupon bonds of the Peterson Co. are selling for 98 percent of par value. The bonds mature in 5 years and pay interest semi-annually. These bonds have a yield to maturity of _____ percent.

9. ABC’s Inc.’s bonds currently sell for $1,280 and have a par value of $1,000. They pay a $135 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1,050. What is their yield to call (YTC)?

10. A bond which sells for less than the face value is called a:
a) discount bond.
b) debenture.
c) perpetuity.
d) par value bond.
e) premium bond.

11. The principal amount of a bond that is repaid at the end of term is called the par value or the:
a) back-end amount
b) face value
c) coupon rate
d) discount amount
e) Coupon

12. Stealers Wheel Software has 5.11% coupon bonds on the market with nine years to maturity. The bonds make semi-annual payments and currently sell for 107.12% of par. What is the current yield?

13. The 13.1 percent, $1,000 face value bonds of Tim McKnight, Inc., are currently selling at $846.48. What is the current yield?

14. ABC’s bonds have a 9.5 percent coupon and pay interest semi-annually. Currently, the bonds are quoted at 106.315 percent of par value. The bonds mature in 8 years. What is the yield to maturity?

15. The rate required in the market on a bond is called the:
a) call yield
b) current yield
c) yield to maturity
d) liquidity premium
e) risk premium

16. A discount bond has a yield to maturity that:
a) exceeds the coupon rate.
b) equals zero.
c) is equal to the current yield.
d) is less than the coupon rate.
e) equals the bond’s coupon rate.

17. Assume that you wish to purchase a 14-year bond that has a maturity value of $1,000 and a coupon interest rate of 7%, paid semiannually. If you require a 5.11% rate of return on this investment (YTM), what is the maximum price that you should be willing to pay for this bond? That is, solve for PV.

18. ABC Corp. issued 15-year bonds 2 years ago at a coupon rate of 10.6%. The bonds make semi-annual payments. If these bonds currently sell for 97% of par value, what is the YTM?

19. BCD’s $1,000 par value bonds currently sell for $798.40. The coupon rate is 10%, paid semi-annually. If the bonds have 5 years to maturity, what is the yield to maturity?

20. ABC has issued a bond with the following characteristics:
Par: $1,000; Time to maturity: 13 years; Coupon rate: 4%;
Assume annual coupon payments. Calculate the price of this bond if the YTM is 7.12%

21. A firm’s bonds have maturity of 10 years with a $1000 face value, an 8% semi-annual coupon, are callable in 5 years, at $1,050, and currently sells at a price of $1,100. What is the yield to call (YTC)?

22. ABC Inc., has $1,000 face value bonds outstanding. These bonds mature in 3 years, and have a 6.5 percent coupon. The current price is quoted at 98.59 percent of par value. Assume semi-annual payments. What is the yield to maturity?
If experiencing difficulty in answering bond type questions, feel free to contact our experts to coach you to have better understand the concepts.

Question 1

If you receive $416 at the end of each year for the first three years and $710 at the end of each year for the next three years. What is the present value? Assume interest rate is 10%.

Question 2

Assume interest rate of 5%. A company receives cash flows of $106,444 at the end of years 4, 5, 6, 7, and 8, and cash flows of $297,138 at the end of year 10. Compute the future value of this cash flow stream.

Do not enter the symbol $ in your answer. Simply enter the answer rounded off to two decimal points.1 points

Question 3  

If you can double your money in 17 years, what is the implied annual rate of interest, given that compounded in quarterly? Note: give your answer in percentages. Note: Do not put % sign in your answer. Simply write the number in percentages in the answer box. 1 points

Question 4

The ABC Company is considering a new project which will require an initial cash investment of $11,995. The projected cash flows for years 1 through 4 are $5,800, $9,546, $9,238, and $5,828, respectively. If the appropriate discount rate is 5%, compute the NPV of the project.

Question 5

How many years it will take you to quadruple (means 4 times) your money if you can earn 4.59% each year? Note: Do not write “years” in your answer. Simply write the number in the answer box.1 points

Question 6

The ABC Company is considering a new project which will require an initial cash investment of $5,723. The project will produce no cash flows for the first 5 years. The projected cash flows for years 6 through 9 are $2,456, $4,090, $6,718, and $3,663, respectively. If the appropriate discount rate is 3%, compute the NPV of the project.

Enter your answer rounded off to two decimal points. Do not enter $ in the answer box.1 points

Question 7

What is the future value of $2,737 invested for 10 years at 16% if interest is compounded quarterly? Note: Do not put $ sign in your answer. Simply write the number in the answer box.1 points

Question 8

Gertrude Carter and Co. has an outstanding loan that calls for equal annual payments of $14,903 over the 10-year life of the loan. The original loan amount was $100,000 at an APR of 8 percent. How much of the third payment is interest?

Do not enter the symbol $ in your answer. Simply enter the answer rounded off to two decimal points. 

Question 9

Barrett Pharmaceuticals is considering a drug project that costs $156,489 today and is expected to generate end-of-year annual cash flows of $12,910, forever. At what discount rate would Barrett be indifferent between accepting and rejecting the project?

Just enter the number in percentages up to 2 decimal points. Do not enter % in the answer box.

Question 10

If you put $700 in a savings account with a 10% nominal rate of interest compounded monthly, what will the investment be worth in 21 months (round to the nearest dollar)?

1 points

Question 11

If you can triple your money in 21 years, what is the implied rate of interest? Note: Do not put % sign in your answer. Simply write the number in percentages in the answer box..1 points

Question 12

In order to buy a house, you take a loan of 100,000 at 7.5% for a period of 13 years. Compute the balance remaining at the end of 5 years.

Do not enter the symbol $ in your answer. Enter your answer as a positive number. Simply enter the answer rounded off to two decimal points.1 points   

Question 13

Say, you deposit $4,529 in a bank for 16 years. What is the amount you will have in the bank at the end of 16 years if interest of 5 % compounded monthly for first 6 years and interest of 5 % compounded quarterly for the remaining years? Note: Do not put $ sign in your answer. Simply write the number in the answer box.

1 points

Question 14

If you can double your money in 30 years, what is the implied annual rate of interest, given that compounded semi-annually? Note: give your answer in percentages. Note: Do not put % sign in your answer. Simply write the number in percentages in the answer box.1 points

Question 15

What is the future value of annual payments of $2,267 for 4 years at 6 percent?1 points

Question 16

How much do you need to invest today in order to have $1,491 at the end of 27 years if you are sure to earn an interest at the rate of 7%, if interest is compounded quarterly? Note: Do not put $ sign in your answer. Simply write the number in the answer box.1 points

Question 17

How many years it will take to grow your money from $3,641 to $7,248 if you can earn an interest of 13% compounded monthly? Note: Do not write “years” in your answer. Simply write the number in the answer box.

Question 18

What is the future value of quarterly payments of $504 for 7 years at 6 percent?1 points

Question 19

Say, you deposit $3,069 in a bank for 19 years. What is the amount you will have in the bank at the end of 19 years if interest of 6 % for first 5 years and interest of 5 % for the remaining years? Note: Do not put $ sign in your answer. Simply write the number in the answer box. 1 points

Question 20

What is the future value of $2,391 invested for 12 years at 10% if interest is compounded semi-annually (twice a year)? Note: Do not put $ sign in your answer. Simply write the number in the answer box.

Question  21

Kelly starting setting aside funds 10 years ago to buy some new equipment for her firm. She has saved $4,143 each quarter and earned an average rate of return of 7 percent. How much money does she currently have saved for this purpose?

1 points

Question 22

If the effective rate is 7%. What is the nominal rate if compounding is daily.  Do not enter the symbol % in your answer. Simply enter the answer in percentages rounded off to two decimal points.

Question 23

Assume interest rate of 4%. A company receives cash flows of $694 at the end of year 5, $295 at the end of year 7, and $947 at the end of year 10. Compute the future value of this cash flow stream.

Do not enter the symbol $ in your answer. Simply enter the answer rounded off to two decimal points.

1 points

Question 24

What is the future value of $7,256 for 9 years at 3 percent if interest is compounded semi-annually? Note: Do not enter “$” in your answer. Simply write down the number that you get as your answer.

1 points

Question 25

Consider a 10-year loan with monthly payments at 10%. If the loan amount is $250,000, compute the Interest paid during the 6^th year.

Enter your answer rounded off to two decimal points. Do not enter $ in the answer box.

1 points

Question 26

How many years it will take you to double your money if you can earn 6% each year, given that compounding is quarterly? Note: Do not write “years” in your answer. Simply write the number in the answer box.

1 points

Question 27

What is the future value of $2,226 invested for 16 years at 17% if interest is compounded semi-annually? Note: Do not put $ sign in your answer. Simply write the number in the answer box.

1 points

Question 28

What is the effective rate of 10% compounded monthly?

Do not enter the symbol % in your answer. Simply enter the answer in percentages rounded off to two decimal points.

1 points

Question 29

How many years it will take to grow your money from $4,284 to $6,266 if you can earn an interest of 7% compounded quarterly? Note: Do not write “years” in your answer. Simply write the number in the answer box.

1 points

Question 30

The Perpetual Life Insurance Co is trying to sell you an investment policy that will pay you and your heirs $14,547 per year forever. Suppose the Perpetual Life Insurance Co. told you the policy costs $184,892. At what interest rate would this be a fair deal? Just enter the number in percentages up to 2 decimal points. Do not enter % in the answer box.

1 points

Question 31

What should you be willing to pay in order to receive $749 annually forever, if you require 10% per year on the investment?

Just enter the number up to 2 decimal points. Do not enter $ in the answer box.

1 points

Question 32

Today, you are purchasing a $3,741 4-year car loan at 7 percent. You will pay annually at the end of each year. What is the amount of each payment?

1 points

Question 33

How many months it will take to grow your money from $4,736 to $6,924 if you can earn an interest of 11% compounded monthly? Note: Do not write “months” in your answer. Simply write the number in the answer box.

1 points

Question 34

How much do you need to invest today in order to have $4,498 at the end of 28 years if you are sure to earn an interest at the rate of 15%, if interest is compounded monthly? Note: Do not put $ sign in your answer. Simply write the number in the answer box

Question 35

Assume interest rate of 6%. Suppose that you receive $75,081 at the end of each year for 4 years. Suppose that this cash flow starts at the end of the fourth year. Compute the present value.

Do not enter the symbol $ in your answer. Simply enter the answer rounded off to two

decimal points.

Question 36

How much do you need to invest today in order to have $14,700 at the end of 11 years if you are sure to earn an interest at the rate of 13%? Note: Do not put $ sign in your answer. Simply write the number in the answer box.

Introduction to Financial Management

Financial Statements, Taxes, and Cash Flow

Working with Financial Statements

Introduction to Valuation: The Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Equity Markets and Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Some Lessons from Capital Market History

Risk and Return

Cost of Capital

Leverage and Capital Structure

Dividends and Dividend Policy

Raising Capital

Short-Term Financial Planning

Working Capital Management

International Aspects of Financial Management

Most popular text books:

Essentials of Corporate Finance, 6/e; Ross•Westerfield•Jordan

Sample schools tutored:

FINP 5008 – Business Finance (Nova Southeastern University)

Financial Accounting or Introductory Accounting is among the first courses business school students encounter in their BBA, MBA or CPA programs. Understanding financial accounting is critical to understanding the performance of a company. Companies use annual reports to communicate their financial performance to all stake holders. Annual reports usually consist of:

1. Balance sheet
2. Income statement
3. Statement of Cash flows
4. Notes and supporting schedules
5. Opinion of the independent certified public accountant

The foundations of the above financial statements are derived from financial accounting and management accounting principles. Accounting 101 provides you with private tutoring options to quickly gain an understanding of the principles and concepts used to prepare the financial statements of a company.