FIN3403-Final Exam Review
December 2017

Chapter Breakdown:
Chap. 5- TVM, Mortgages
Chap. 6- Beta/Expected Return of Portfolio
Chap. 7- Bonds
Chap. 8- Stocks
Chap. 9- WACC, Cost of (debt, common equity-internal/external, preferred stock)
Chap. 10- IRR, NPV, EAA, Profitability Index, MIRR
Chap. 11- IO, ACF, TCF, NPV
Chap. 12- DOL, DCL, DFL, Breakeven, EBIT level of indifference
Chap. 13- Stock Splits

Time Value of Money

Time Value of Money
You currently have $2,000.00 in an account and plan on depositing $1,000.00 into the account
each month, starting in 1 month. If the account earns a nominal rate (monthly compounding)
of 6.10%, how much will be in the account (what is the future value) in 8 years, just after
making your final deposit?
A.
$72,754
B.
$95,188
C.
$117,810
D.
$126,607
E.
$140,526

Time Value of Money
You currently have $2,000 in an account and plan on depositing $1,000 into the account each
month, starting in 1 month. If the account earns a nominal rate (monthly compounding) of
6.10%, how much will be in the account (what is the future value) in 8 years, just after making
your final deposit?
A.
$72,754
B.
$95,188
C.
$117,810
D.
$126,607
E.
$140,526
PV = -2,000
PMT = -1,000
P/Yr = 12
I/Yr = 6.10
N = 96
(12 x 8)
FV = ?

Time Value of Money - Effective Annual Rate
Estimate the effective annual rate (EAR) for a monthly compounded annual nominal
rate of 10.00%.
A.
10.2109%
B.
10.4713%
C.
10.5999%
D.
10.7264%
E.
11.328%

Time Value of Money - Effective Annual Rate
Estimate the effective annual rate (EAR) for a monthly compounded annual nominal
rate of 10.00%.
A.
10.2109%
B.
10.4713%
C.
10.5999%
D.
10.7264%
E.
11.328%
P/Yr = 12
I = 10
[SHIFT] EFF % = ?

Time Value of Money (TVM) - Uneven Cash Flows
What is the NPV of a project with the following expected cash flows? Use a discount
rate of 15%.
Year
Project Cash Flow
0
-$250,000
1
50,000
2
50,000
3
75,000
4
75,000
5
75,000
6
125,000
A.
-$1,344
B.
$9,108
C.
$14,810
D.
$27,043
E.
$40,026

Time Value of Money (TVM) - Uneven Cash Flows
What is the NPV of a project with the following expected cash flows? Use a discount
rate of 15%.
Year
Project Cash Flow
0
-$250,000
1
50,000
2
50,000
3
75,000
4
75,000
5
75,000
6
125,000
A.
-$1,344
B.
$9,108
C.
$14,810
D.
$27,043
E.
$40,026
-250,000
CF0
50,000
CF1
2
SHIFT
NJ
75,000
CF2
3
SHIFT
NJ
125,000
CF3
15 I/Yr
1 P/Yr
SHIFT
NPV

Bonds

Bonds – Bond Valuation
Microsoft issued a bond with a par value of $1,000, a coupon rate of 7.25% (semiannual
coupon), and a yield to maturity of 6.60%. The bond has 12 years to maturity. What is
the value of the bond?
A.
$985
B.
$1,015
C.
$1,035
D.
$1,053
E.
$1,135

Bonds – Bond Valuation
Microsoft issued a bond with a par value of $1,000, a coupon rate of 7.25% (semiannual
coupon), and a yield to maturity of 6.60%. The bond has 12 years to maturity. What is
the value of the bond?

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