Calculations Shown

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1. The term structure of interest rates involves the relationship between, A. risk and yields. B. yeilds and bond ratings. C. term ans yields. D. stock and bond yields.

2. Which one of the following statements about pension plans is correct? A. A pension plan that grants mortgage loans is an example of a financial intermediary. B. A pension plan that grants mortgage loans can't suffer losses. C. A pension plan that grants mortgage loans is called a savings and loan association. D. A pension plan that grants mortgage loans isn't an example of a financial intermediary.

3. A stock is currently selling for \$40.00 per share. What is your gain/loss if you buy a round lot and the price declines to \$28.00? A. you would lose \$600.00. B. you would lose \$1,200. C. you would gain \$1,200. D. you would gain \$6,000.

4. A stock is currently selling for \$36.00 a share. What is your gain/loss if you sell the stock short and the price rises to \$62.00. A. you would lose \$26.00 per share. B. you would gain \$26.00 per share. C. you would gain \$13.00 per share. D.you would lose \$6.00 per share.

5. Which of the following is indicated by an upward sloping yield curve? A. lower prices for short term maturity. B. higher prices for long term maturity. C. lower interest rates for long term maturity. D. higher interest rates for long term maturity.

6. A current ratio is presently 2:1. Which of the following statements about the ratio is not correct? A. the current ratio is smaller than the quick ratio. B. the current ratio is unaffected by exchanging bonds for stock. C. the current ratio is reduced by purchasing a

plant with cash. D. the current ratio is increased by using cash to retire accounts payable.

7. Accountants suggest that assets should be valued at, A. cost. B. the lower of market or cost. C. market. D. the higher of market or cost.

8. If you deposit \$700.00 in an account today, and the money grows to \$1,800 in 14 years, what rate of annual interest have you earned? A. 4 percent. B. 7 percent. C. 10 percent. D. 50 percent.

9. If you deposit \$10,000 in an investment that yields 6 percent annually, how many years will it take for your investment to double in value? A. 12 years. B. 15 years C. 18 years. D. 20 years.

10. Which of the following is considered to be a current liability? A. work-in-process. B. raw materials. C. accounts payable. D. short term money market instruments.

11. What is the future value of an ordinary annuity if you deposit \$1,500 per year for the next 5 years into an account that earns an interest rate of 5 percent annually. A. \$8,288. B. \$7,500. C. \$6,322. D. \$1,914.

12. If an account has a current value of \$84,000 and earns an interest rate of 4 percent annually, for how many years can you withdraw \$10,000 from the account? A. 8. B 10. C. 12. D. 20.

13. Which of the following is calculated by subtracting the cost of goods sold and administrative expense from net sales? A. operating income. B. accounts receivable. C. total liabilities. D. inventory cost.

14. If an account has an annual interest rate of 12 percent, what is the present value of \$1,000,000 to be received 10 years from today? A. \$3,105,848. B. \$789,633. C. \$321,973. D. \$56,984.

15. Which of the following would be most likely cause of an increase in inventory turnover? A. the faster collection of accounts receivable. B. lowered sales. C. an increase in the inventory level. D. a reduction in the price of the product.

16. Which of the following types of ratio is used to measure activity? A. a leverage ratio. B. a turnover ratio. C. a profitability ratio. D. a liquidity ratio.

17. If the annual interest rates are 10 percent, which of the following values will be the lowest? A. the future value of a \$100.00 investment after 3 years. B. the future value of an annuity after 4 years, if \$100.00 is deposited annually. C. the persent value of an investment that will be worth \$100.00 after 2 years. D. the persent value of an annuity that will pay \$200.00 a year, at the end of each of the next 4 years.

18. At an interest rate of 20 percent compounded annually, how many years will it take for an investment of \$6,000 to grow to \$10,000? A. 1 year. B. 3 years. C. 5 years. D. 7 year.

19. If \$800.00 is deposited in a savings account that pays an interest rate of 5 percent annually, how much money will be in the account after 15 years? A. \$1,663. B. \$1,609. C. \$384.00. D. \$238.00.

20. If the interest rate on an account is 8 percent annually, what is the present value of \$40,000 to be received 5 years from today? A. \$6,188. B. \$10,018. C. \$22,073. D. \$27,223.

21. What is the future value of an ordinary annuity if you deposit \$500.00 per year for the next 10 years in an account that earns an interest rate of 13 percent annually? A. \$1,700. B. \$5,000. C. \$9,210. D. \$14,990.

22. Profitability ratios are used to measure, A. liquidity. B. leverage. C. performance. D. turnover.

23. If annual interest rates are 10 percent, which of the following values will be the greatest? A. the future value of an annuity after 4 years, if \$100.00 is deposited annually. B. the future value of a \$100.00 investment after 3 years. C. the persent value of an investment that will be worth \$100.00 after 2 years. D. the persent value of an annuity that will pay \$200.00 a year, at the end of each of the next 4 years.

24. Which of the following is calculated by adding total liabilities plus equity? A. Total assets. B. Hidden assets. C. Inventory. D. Operating income.

25. Discounting determines the worth of funds to be received in the future in terms of their, A. present value. B. future value. C. cost factor. D. time factor.

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Calculations Shown
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