FINANCE 340: FINANCIAL MANAGEMENT
CHAPTER 5: INTEREST RATES
1. Periodic interest rates. In the following table fill in the periodic rates and the effective annual rates
Period
Semiannual
Quarterly
Monthly
Daily
APR
8%
9%
7.5%
3.5%
r = APR/m
EAR = (1+(APR/
H0: p =
Ha: p=/
Sample n =
p-bar =
0.2
0.2
400
0.175
a. z = (p-bar - p0)/sqrt(p0(1-p0)/n) =
-1.25
b. p-value =
0.1056
0.2112
Since we are dealing with equals/not equals we multiply the p-value by 2
c. Using a = .05 we CANNOT conclude that the population p
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Finance 342: FINANCIAL MANAGEMENT
CHAPTER 5: FINANCIAL OPTIONS
1. Option basics
The Chicago Board Options Exchange (CBOE) is one of the world's largest options exchanges. CBOE and other options exchanges trade contracts that give buyers and sellers the ri
FINANCE 340
CHAPTER 10: CASH FLOW ESTIMATION
1. Erosion costs. Heavenly Cookie Company reports the following annual sales and costs for its current product line:
Volume
Price
Cost
Chocolate Snicker
Peanut
Lemon
Chip
Doodle
Butter
Drop
Cream Filled
251000
FINANCE 340: FINANCIAL MANAGEMENT
CHAPTER 8: RISK AND RETURN
1. Holding period and annual (investment) returns. Baker Baseball Cards, Inc. originally purchased the rookie card of Hammerin' Hank Aaron for $36.00.
After holding the card for 7 years, Baker B
FINANCE 340
CHAPTER 11: THE COST OF CAPITAL
1. Cost of debt. Dunder-Mifflin, Inc. (DMI) is selling 600,000 bonds to raise money for the publication of new magazines in the coming year. The bond will pay a coupon rate of 12.9
semiannual payments and will m
FINANCE 340: FINANCIAL MANAGEMENT
CHAPTER 7: STOCKS AND STOCK VALUATION
1. Dietterich Electronics wants its shareholders to earn a return of 12% on their investment in the company. At what price would the stock need to be priced today if
Dietterich Electr
FINANCE 340: FINANCIAL MANAGEMENT
CHAPTER 6: BONDS AND BOND VALUATION
1. Bond prices. Price the bonds from the following table with semiannual coupon payments.
Par Value
$5,000.00
$5,000.00
$1,000.00
$5,000.00
Coupon Rate
9%
11%
10%
7%
Years to Maturity
Y
Chapter 1
The cycle of money is: the movement of funds from a lender to a borrower and back to the lender
The objective of every financial transaction is: to make all parties better off
An individual opens a savings account at a local commercial bank with