Practice Final Exam Questions
This practice final exam is, again, not full-length (it should take about 45-60 minutes for those
comfortable with the material); however, it provides examples of the types of questions which I
may ask broken down into three
Problem Set #2: TVM and Bond Pricing 1. Which one of the following is the correct formula for the future value of $500 invested today at 7 percent interest for 8 years? A. FV = $500/[(1 + 0.08) 7] B. FV = $500/[(1 + 0.07) 8] C. FV = $500/(0.07 8) D. FV =
Problem Set (Chapters 8 and 9)
Capital Budgeting Decision-Making Techniques
1. The net present value of an investment represents the difference between the investment's:
A. cash inflows and outflows.
B. cost and its net profit.
C. cost and its market valu
Problem Set (Chapters 4 7) - AK
TVM, DCF, Bond, and Stock Valuation
1. Which one of the following is the correct formula for the future value of $500 invested today at
7 percent interest for 8 years?
A. FV = $500/[(1 + 0.08) 7]
B. FV = $500/[(1 + 0.07) 8]
1. Your grandparents just gave you a gift of $15,000. You are investing this money for 12 years at 6
percent simple interest. How much money will you have at the end of the 12 years?
PV=15,000, N=12, K=6
FV=$30,182.95
2. Jim just deposited $13,000 into hi
Chapter 09 - Making Capital Investment Decisions
Chapter 09
Making Capital Investment Decisions
Multiple Choice Questions
1. Any changes to a firm's projected future cash flows that are caused by adding a new project
are referred to as which one of the fo
Problem Set #3 Extra
1. Investors require a 4 percent return on risk-free investments. On a particular risky investment,
investors require an excess return of 7 percent in addition to the risk-free rate of 4 percent. What
is this excess return called?
A.
Question #3 Final
Question #11
PMT
1000
i
0.064
12
n
1000
2.10522993
1.10522993
17.2692176
17269.2176
Thus bob will have $17,269.22 on his IRA account on his 35th birthday.
On his 65th birthday, he will have
A
17269.22
6.430561
111050.75 Check in Graph ca
#1
Lycan, Inc., has 7.8 percent coupon bonds on the market that have 7 years left to maturity. The bonds make annual payments.
Required: If the YTM on these bonds is 9.8 percent, what is the current bond price?
Current bond price
$
901.99 1%
Explanation:
February 13, 2014
Jay Coughenour
1
2
Interest rate (r), also referred to as:
Discount rate
Cost of capital
Required return
Terminology depends on usage
Time (t) is the number of compounding periods
Years,
February 25, 2014
Jay Coughenour
Perpetuity
A constant stream of cash flows that lasts forever
Growing perpetuity
A stream of cash flows that grows at a constant rate
forever
Annuity
A stream of constant cash flows that lasts for a fixed
number of peri
FINC311-013 Fall 2016
Extra Credit Assignment
Due date Monday, 10/31/16
1. What does FICO stand for?
FICO stands for Fair Isaac Corporation (FICO), which is a company that uses software to calculate a
person's credit score.
2. What does the FICO score mea
Donohue-Babiak, Allison
Finance 311
Fall 2016
Assignment 1
Write no more than half a page for each of your answers. Consult as many sources as
you need but refrain from copying answers directly from a textbook or a source, use your
own words. Call or emai
83
1.4
96
Suppose a stock had an initial price of $78 per share, paid a dividend of $1.25 per share during the year, and had an ending share price of $87. Compute the percentage total return
0.01686747 0.15662651
1.69%
15.66%
17.35%
Total return = 13.14%
FinanceChapter9StudyGuide:
1. Aprojecthassalesof$462,000,costsof$274,000,depreciationof$26,000,interest
expenseof$3,400,andataxrateof35percent.Whatisthevalueofthedepreciationtax
shield?
a. Depreciationtaxshield=$26,0000.35=$9,100
b. Depreciationtaxshield=
Review
Bond investors could expect to receive the following cash
flows if holding the bond until maturity:
Face Value: One lump-sum cash flow paid at the maturity
date
Coupon Rate and Coupon Payment Frequency: Annuitytype cash flow (coupon payment) pai
Review Return
Historical data tells us:
Arithmetic average return: Return earned in an average
period over multiple periods
T
yearly ret urn
Historical Average Ret urn i1
T
Geometric average return: buy-and-hold compound return
per period over multiple p
March 11, 2014
Jay Coughenour
1
6-2
3
4
High Grade
Moodys Aaa and S&P AAA capacity to pay is
extremely strong
Moodys Aa and S&P AA capacity to pay is very
strong
Medium Grade
Moodys A and S&P A capacity to pay is strong,
but
more susceptible to changes
February 27, 2014
Jay Coughenour
Perpetuity and Growing Perpetuity
C
PV =
r
Annuity and Growing Annuity
C
1
PV = 1
r (1 + r )T
All give the PV at t=0 when first cash flow
arrives at time t=1.
4-1
How much do I need to save each month to
have $3 million
March 6, 2014
Jay Coughenour
1
2
1: something that binds or restrains
2: a binding agreement : covenant; promise
3. a : a band or cord used to tie something, b : a material or device for binding, c : an attractive
force that holds together the atoms, ions
Single cash ows:
_ FV
_ (1 + r)r
PV
FV = PV(1 + r)t
l
FV t
r=() -1
PV
FV
t: E
ln(1+r)
The effective annual rate (EAR) for stated annual percentage rate (APR) compounded n times per
year:
EAR = (1 + APR m) 1
Perpetuities starting l-period from today:
February 20, 2014
Jay Coughenour
1
2
Rates are generally stated in terms of APR
A car loan might be stated as
6% APR - compounded monthly
A credit card loan might be stated as
9.99% APR, compounded daily
A savings account might be stated as
1.9% APR