Finance For Business Study Guide Essay

590 words - 3 pages

Northwest Bank pays a quoted annual (nominal) interest rate of 4.75%. However, it pays interest (compouned) daily using a 365-day year. What is the effective annual rate of return (APY)? A. 4.75% B. 4.86% C. 5.02% D. 3.61%

14) You have $10,000 to invest. You do not want to take any risk, so you will put the funds in a savings account at the local bank. Of the following choices, which one will produce the largest sum at the end of 22 years? A. An account that compounds interest annually B. An account that compounds interest monthly C. An account that compounds interest daily D. An account that compounds interest quarterly

15) When George Washington was president of the United States in 1797, his salary was $25,000. If you assume an annual rate of inflation of 2.5%, how much ...view middle of the document...

It is the least commonly used method of financial forecasting. B. It projects all liabilities as a fixed percentage of sales. C. It is a much more precise method of financial forecasting than a cash budget would be. D. It involves estimating the level of an expense, asset, or liability for a future period as a percent of the forecast for sales revenues.

18) The primary purpose of a cash budget is to: A. determine the level of investment in current and fixed assets. B. determine the estimated income tax for the year. C. determine accounts payable. D. provide a detailed plan of future cash flows.

19) The break-even model enables the manager of a firm to: A. calculate the minimum price of common stock for certain situations. B. determine the optimal amount of debt financing to use. C. set appropriate equilibrium thresholds. D. determine the quantity of output that must be sold to cover all operating costs.

20) Which of the following is a non-cash expense? A. Depreciation expenses B. Administrative salaries C. Interest expense D. Packaging costs

21) A plant can remain operating when sales are depressed: A. if the selling price per unit exceeds the variable cost per unit. B. unless variable costs are zero when production is zero. C. to help the local economy. D. in an effort to cover at least some of the variable cost.

22) At what rate must $400 be compounded annually for it to grow to $716.40 in 10 years? A. 7% B. 6% C. 5% D. 8%

23) The present value of a single future sum: A. depends upon the number of discount periods. B. increases as the number of discount periods increas. C. is generally larger than the future sum. D. increases as the discount rate increases.

24) How long will it take $750 to double at 8% compounded annually? A. 9 years B. 6.5 years C. 48 months D. 12 years

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