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Fin500 Exam Essay

2409 words - 10 pages

1. You are considering an annuity which costs $100,000 today. The annuity pays $6,000 a year. The rate of return is 4.5%. What is the length of the annuity time period?
| 31.49 years |
| 38.00 years |
| 24.96 years |
| 33.08 years |
| 29.48 years |
2. Which one of the following statements is correct concerning corporations?
| The income of a corporation is taxed as personal income of the stockholders. |
| The largest firms are usually corporations. |
| The ability of a corporation to raise capital is quite limited. |
| The stockholders are usually the managers of a corporation. |
| The majority of firms are corporations. |
3. Southern ...view middle of the document...

You have found five different accounts that are acceptable to you. All you have to do now is determine which account you want to use such that you can earn the highest rate of interest possible. Which account should you use based upon the annual percentage rates quoted by each bank? |

| Account C |
| Account A |
| Account B |
| Account E |
| Account D |
6. Aunt Clarisse has promised to leave you an annuity that will pay $60 next year and grow at an annual rate of 4%. The payments are expected to go on indefinitely and the interest rate is 9%. What is the value of the growing perpetuity? |

| $667 |
| $693 |
| $1,200 |
| $1,248 |
| None of the above |
7. The basic regulatory framework in the United States was provided by:
| the Securities Act of 1933. |
| the Securities Exchange Act of 1934. |
| the monetary system. |
| A and B. |
| All of the above. |
8. The primary goal of financial management is to:
| maintain steady growth in both sales and net earnings. |
| minimize operational costs and maximize firm efficiency. |
| maximize current dividends per share of the existing stock. |
| maximize the current value per share of the existing stock. |
| avoid financial distress. |
9. The Robertson Firm is considering a project which costs $123,900 to undertake. The project will yield cash flows of $4,894.35 monthly for 30 months. What is the rate of return on this project? |

| 12.53% |
| 14.02% |
| 14.59% |
| 13.59% 蒙 |
| 13.44% |
10. Which one of the following statements concerning interest rates is correct?
| The annual percentage rate increases as the number of compounding periods per year increases. |
| The stated rate is the same as the effective annual rate. |
| For any positive rate of interest, the effective annual rate will always exceed the annual percentage rate. |
| An effective annual rate is the rate that applies if interest were charged annually. |
| Banks prefer more frequent compounding on their savings accounts. |
11. Which of the following are advantages of the corporate form of business ownership?
I. limited liability for firm debt
II. double taxation
III. ability to raise capital
IV. unlimited firm life
| I, III, and IV only |
| I and II only |
| II, III, and IV only |
| I, II, and III only |
| III and IV only |
12. Financial managers should strive to maximize the current value per share of the existing stock because:
| the current stockholders are the owners of the corporation. |
| doing so guarantees the company will grow in size at the maximum possible rate. |
| doing so increases the salaries of all the employees. |
| The managers often receive shares of stock as part of their compensation. |
| doing so means the firm is growing in size faster than its competitors. |
13. If you have a choice to earn simple interest...

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