Brad Barrow
Finance Questions on Time Value of Money
1. At what annual interest rate must $250,000 be invested so that it will grow to be $500,000
within a 20 year period?
Solution:
N=20
PV = $-250,000
FV = $500,000
Equation:
FV = PV(1+R)N Solve for R
R =
Brad Barrow
Finance Questions on Security Market Indices
1. Calculate and interpret single-period price return of the index.
Security
Beginning of
Period Price ($)
Ending of
Period Price ($)
Dividends per
share
($)
Shares
Outstanding
1
10.00
12.00
0.50
20
Brad Barrow
Finance Question on Portfolio Risk and Return II
With respect to the capital asset pricing model, if the expected market risk premium is 6%
and the risk-free is 3%, the expected return for the security listed below is approximately:
Security 1
Brad Barrow
Finance Question on Portfolio Risk and Return I
Consider a newly issued bond that pays its coupon once annually, and whose coupon rate is
5%; the maturity is 20 years, and yield to maturity is 8%. Assuming there are no taxes,
find the holding
Brad Barrow
Finance Question on Portfolio Management
In the United States a 401(k) is what type of pension plan?
A. Defined benefit
B. Defined contribution
C. Mutual fund
- A defined benefit pension plan (DB plan) is a type of pension plan in which an
emp
Brad Barrow
Finance Questions on Measures of Leverage
1. Calculate degree of operating leverage in order to predict the increase in operating income
when there is a 15% increase in sales. Sales are $2,000,000, contribution margin ratio is 40% and
fixed co
Brad Barrow
Finance Questions on Financial Statement Analysis
1. Profit before interest and taxes is 1000$, its margin is 15% and its asset turnover ratio is 8.
What will the margin be if it increases its asset turnover ratio to 14 and profit before inter
Brad Barrow
Finance Question on Equity Valuation
You are considering buying common stock in Company ABC. The firm yesterday paid a
dividend of $5.20. You have projected that dividends will grow at a rate of 8.0% per year
indefinitely. If you want an annua
Brad Barrow
Finance Question on Cost of Capital
The ABC Company has common stock outstanding that has a current price of $20 per share and
a $0.5 dividend. ABCs dividends are expected to grow at a rate of 3% per year, forever. The
expected risk-free rate