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Unformatted text preview: VERSION 1 1 M I M E 3 1 0 E N G I N E E R I N G E C O N O M Y Class Test #1 Friday, 13 February, 2009 90 minutes PRINT your family name / initial and record your student ID number in the spaces provided below. FAMILY NAME / INITIAL STUDENT ID # S O L U T I O N S This test consists of 19 multiple-choice questions, and two problems requiring a full solution. The multiple-choice questions are worth a total of 74 points. There are no penalties for incorrect answers. The problems are worth a total of 26 points. MULTIPLE-CHOICE QUESTIONS Circle the correct answers on this test paper and record them on the computer answer sheet. Multiple-choice Statements Circle the correct answer on this test paper and record it on the computer answer sheet. (2 points each for a total of 14) Note : There are no penalties for incorrect answers. 1. Which of the following statements is/are correct? All else being the same, I. the present value of an amount of money received in the future increases as the dis- count rate increases. II. the present value of an amount of money received in the future increases the further away it is from today. III. the present value equivalent of a future value is always smaller than that value when both the interest rate and the number of compounding periods are positive. A) I only B) I and II only C) II only D) III only E) II and III only #20: /13 #21: /13 Total: /26 VERSION 1 2 2. A bond sold five weeks ago for $1100. The bond is worth $1050 in today's market. As- suming no changes in risk, which one of the following statements is true? A) The face value of the bond must be $1100. B) The bond must be within one year of maturity. C) Market interest rates must be lower now than they were five weeks ago. D) The bond's current yield to maturity has increased from five weeks ago. E) The coupon payment of the bond must have increased. 3. The assets in a Balance sheet ___________________________________. I. always sum up to a value equal to total liabilities less shareholders' equity. II. represent items acquired with the use of the firm's assumed liabilities and equity. III. are listed downwards in order of increasing liquidity. A) I only B) II only C) III only D) I and III only E) II and III only 4. Which of the following is not a current asset? A) Inventory B) Cash on hand C) Patents D) Accounts receivable E) Marketable securities 5. A firm has a current ratio of 2.3. If dividends payable are paid from a line of credit (short- term bank loan), the quick ratio will: A) remain unchanged. B) increase. C) decrease. D) insufficient information to determine the effect E) none of the choices listed above 6. Cash outflows for payment of preferred dividends is an example of: A) cash flows from financing activities....
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- Winter '09