Exam1_sample_questions

Exam1_sample_questions - FINA 363 Sample Exam Questions...

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Introductory Concepts 1. Which of the following statements is incorrect ? (a) Maximizing the stock price (or shareholder wealth) is the main objective of a manager, but she/he sometimes strays from this goal due to agency problems. (b) According to the Fisher equation, the real interest rate is usually negative when the nominal (c) The ±ask²price is the price at which dealers sell securities and is higher than the ±bid²price. (d) NASDAQ is an example of the over-the-counter (OTC) market. 2. In ³nancial markets, dealers maintain inventory and quote ±bid²and ±ask²prices. The bid price is the price at which dealers securities (e.g. from/to you) and is than the ask price. (a) buy; higher (b) buy; lower (c) sell; higher (d) sell; lower The Time Value of Money 3. You put $20 ; 000 in a college trust fund for your children today. In order for the balance of the fund to become $50 ; 000 eighteen (18) years from today, what average annual rate of return ( i ) must this fund earn? (a) 1 : 39% (b) 2 : 28% (c) 4 : 69% (d) 5 : 22% (e) 6 : 30% 4. If the interest rate is 8% per year (annual compounding), what is the future value of $8 ; 888 eight years from today (at the end of 8 th year)? (a) $14 ; 820 (b) $15 ; 103 (c) $16 ; 451 (d) $16 ; 820 (e) $18 ; 888 5. In order to support your daughter´s (son´s) college education, you decide to save a ³xed amount in a college trust fund at the end of every year for eighteen (18) years. You would like to have $80 ; 000 in the fund eighteen (18) years from today. When the average annual rate of return on the fund is 5 percent, how much do you need to save each year? 1
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(a) $1 ; 847 (b) $2 ; 136 (c) $2 ; 844 (d) $4 ; 444 (e) $6 ; 844 6. What is the present value of $10 ; 000 that will be paid 3 years ( 36 months) from today, when the APR (monthly compounded annual interest rate) is 9 : 6% ? (a)
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This note was uploaded on 11/05/2011 for the course FINA 363 taught by Professor Masoudie during the Spring '10 term at South Carolina.

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Exam1_sample_questions - FINA 363 Sample Exam Questions...

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