Question:
1. What kind of financial performance measures can be used to measure/evaluate both profitability; and liquidity/solvency?
1. You decide you want your child to be a millionaire. You have a son today and you deposit $15,000 in an investment account that earns 9% per year. The money in the account will be distributed to your son whenever the total reaches $1,000,000. How old will your son be when he gets the money (rounded to the nearest year)? (Points : 1)
A 82 years
B 74 years
C 60 years
D 49 years
2. How much money must you pay into an account at the end of each of 20 years in order to have $100,000 at the end of the 20th year? Assume that the account pays 6% per year, and round to the nearest $1. (Points : 1)
A $1,840
B $2,028
C $2,195
D $2,718
3. Preferred stock is similar to a bond in the following way (Points : 1)
A preferred stock always contains a maturity date.
B both investments provide a stated income stream.
C both contain a growth factor similar to common stock.
D both provide interest payments.
1. A financial advisor tells you that you can make your child a millionaire if you just start saving early. You decide to put an equal amount each year into an investment account that earns 7.5% interest per year, starting on the day your child is born. How much would you need to invest each year (rounded to the nearest dollar) to accumulate a million for your child by the time he is 35 years old? (Your last deposit will be made on his 34th birthday.) (Points : 1)
A $6,525
B $7,910
C $12,500
D $20,347
2. The present value of $1,000 to be received in 5 years is ________ if the discount rate is 7.8%. (Points : 1)
A $368
B $494
C $548
D $687
3. A typical measure for the risk-free rate of return is the (Points : 1)
A U.S. Treasury Bill rate.
B prime lending rate.
C money market rate.
D short-term AAA-rated bond rate.
1. The capital asset pricing model (Points : 1)
A provides a risk-return trade off in which risk is measured in terms of the market volatility.
B provides a risk-return trade off in which risk is measured in terms of beta.
C measures risk as the coefficient of variation between security and market rates of retDurn.
D depicts the total risk of a security.
2. Assume that Brady Corp. has an issue of 18-year $1,000 par value bonds that pay 7% interest, annually. Further assume that today’s required rate of return on these bonds is 5%. How much would these bonds sell for today? Round off to the nearest $1.
A $1,233.79
B $1,201.32
C $1,134.88
D $1,032.56
3. What is the value of a bond that matures in 5 years, has an annual coupon payment of $110, and a par value of $2,000? Assume a required rate of return of 7%. (Points : 1)
A $938.50
B $1,876.99
C $1,890.07
D $1,750.00
1. A corporate bond has a coupon rate of 12%, a yield to maturity of 10.55%, a face value of $1,000, and a market price of $850. Therefore, the annual interest payment is (Points : 1)
A $101.75
B $102
C $105.50.
D $120.0
2. A typical measure for the risk-free rate of return is the (Points : 1)
A U.S. Treasury Bill rate.
B prime lending rate.
C money market rate.
D short-term AAA-rated bond rate.
3. How much money must you pay into an account at the end of each of 20 years in order to have $100,000 at the end of the 20th year? Assume that the account pays 6% per year, and round to the nearest $1. (Points : 1)
A $1,840
B $2,028
C $2,195
D $2,718
