FIN 201 – Your parents invested $1000 at the end of each month for the last 10 years

Subject: Business    / Finance
Question

Your parents invested $1000 at the end of each month for the last 10 years to save for your college tuition. The investment is now worth $200,000. What is the nominal interest rate or annual percentage rate on their investments?

7.13%

12.47%

11.77%

9.58%

7.69%

QUESTION 19

Assume the risk-free rate is 5% and that the risk premium on the market is 5%. If a stock has a required rate of return of 9.0%, what is its beta?

0.90

1.00

0.40

1.13

0.80

2.5 points

QUESTION 20

Mason’s Flower shop is considering a project with the following cash flows. What is the IRR of this project?

15.18%

15.58%

16.58%

14.08%

15.98%

2.5 points

QUESTION 21

GAMA Corp is considering a project that will produce cash inflows of $6,000 a year for 2 years with a final cash inflow of $12,000 in year 3. The project’s initial cost is $18,500. What is the net present value of this project if the required rate of return is 10 percent?

929.00

1,167.54

427.56

-1,083.34

1,052.67

2.5 points

QUESTION 22

Neptune Inc.’s bonds currently sell for $1,200 and have a par value of $1,000. They pay a $110 annual coupon and have a 10 years to maturity, but they can be called in 3 years at $1,120. What is their yield to call (YTC)?

6.20%

7.09%

7.98%

7.54%

8.28%

2.5 points

QUESTION 23

Shares of common stock of the Lowes Co. offer an expected total return of 19%. The dividend is expected to grow at a constant 7% per year. The dividend yield must be:

7.00%

26.00%

-7.00%

12.00%

19.00%

2.5 points

QUESTION 24

Interest rates on 2-year Treasury securities are currently 7%, while 4-year securities yield 8.0%. If the pure expectations theory is correct, what does the market believe that 2-year securities will be yielding 2 years from now?

15.00%

9.00%

7.50%

4.00%

3.50%

2.5 points

QUESTION 25

If the economy booms, Monster Beverage stock is expected to return 20%. If the economy goes into a recessionary period, then Monster Beverage is expected to only return 5%. The probability of a boom is 60% while the probability of a recession is 40%. What is the standard deviation of the returns on Monster’s stock?

14.0%

12.5%

7.35%

.54%

2.5 points

QUESTION 26

The days sales outstanding tells us how long it takes, on average, to collect after a sale is made. The DSO can be compared with the firm’s credit terms to get an idea of whether customers are paying on time.

True

False

2.5 points

QUESTION 27

Kate plans on saving $10,000 at the end of each year and expects to earn a nominal interest rate of 7.75% per year. How much will she have at the end of 30 years if she earns what she expects?

$1,113,169.97

$1,082,169.97

$1,135,169.97

$1,040,169.97

$1,068,169.97