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# Just three quick multiple choice finance questions i'm not coming up with the correct answers- 1.

Just three quick multiple choice finance questions i'm not coming up with the correct answers-

1. Consider an asset that costs \$783,200 and is depreciated straight-line to zero over its eight-year tax life. The asset is to be used in a five-year project; at the end of the project, the asset can be sold for \$139,000.

Required:
If the relevant tax rate is 30 percent, what is the after tax cash flow from the sale of this asset?

\$185,410

\$293,700

\$41,700

2. Consider the following information on large-company stocks for a period of years.

Series Arithmetic Mean
Large-company stocks 12.90 %
Small-company stocks 17.00
Long-term corporate bonds 6.80
Long-term government bonds 6.70
Intermediate-term government bonds 6.20
U.S. Treasury bills 4.40
Inflation 3.70
________________________________________

Required:
(a) What was the arithmetic average annual return in nominal terms?

13.55%

8.87%

6.80%

17.00%

12.90% (I think this is the correct answer)

(b) What was the arithmetic average annual return in real terms?

8.15%

12.90%

8.87%

23.00%

NOTE: I used the Fisher equation to solve this question and didn't come up with the right answer.
Fisher equation: 1 + R = (1+r) x (1+h)

When i plugged everything in I got an answer of 17.80% and that is not correct.

3. You purchased a zero-coupon bond one year ago for \$275.83. The market interest rate is now 9 percent.

Required:
If the bond had 15 years to maturity when you originally purchased it, what was your total return for the past year?

5.40%

3.20%

5.71%

3.31%

Let me know if you have any questions, I'll be online.. Thanks you!

Attached Excel file... View the full answer

Solutions to assignment of mysnfox6 (Mar 10)
1. \$185,410
Selling price
Add: Tax savings from loss on sale
Acquisition cost
Less: Accumulated depreciation
(\$783,200 x 5/8)
Book value
Selling price...

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