# HFT 4464-Finance Quizzes

 A college education cannot be considered as an investment ch.2 false The current yield of a bond is the rate of return on a bond as its current price ch.2 true A bond with a rating of Aa is better than a bond rated Bb ch.2 true As interest rates increase, the price of outstanding bonds decrease ch.2 true Most stock trading occurs on the secondary market ch.2 true Given a two-year loan of \$50,000 and an annual interest rate of 8%, how much interest will accrue during the life of the loan? ch.2 \$8,000 The range of correlation coefficient is 0 to -1 ch.2 false The best way for a large hospitality firm to hedge a price increase in a commodity would be to buy a futures contract ch.2 true Assume you buy a share of stock for \$19 and hold it for one year. During that year you receive \$1.80 in dividends. At the end of the year you sell the stock for \$20. What is your holding period return (pre-tax)? ch.2 14.74% The current yield of a bond is the rate of return on a bond if you hold it until maturity ch.2 false A bond with a rating of AA is better than a bond rated AAA ch.2 false As interest rates increase, the prices of outstanding bonds also increase ch.2 false IPO’s are issued on the primary market ch.2 true Given a two-year loan of \$60,000 and an annual interest rate of 9 percent, how much interest will accrue during the life of the loan? (Assume no principle payments during the term) ch.2 \$10,800 The range of correlation coefficient is 0 to +1 ch.2 false Assume you buy a share of stock for \$20 and hold it for one year. During that year you receive \$1.20 in dividends. At the end of the year you sell the stock for \$19. What is your holding period return (pre-tax) ch.2 1% The balance sheet indicates the financial position of a business at a specific date or point of time. ch3. True The uniform system of accounts helps managers organize income statement of a business.ch,3 True The statement of cash flows lists the cash flows generated by five major activities.c.3 False Owners would like to have higher current ratio. ch.3 false Liquidity ratios measure the amount of long-term debt held by the firm. ch.3 false Over the long term, successful companies generate positive cash flows from operating activities. ch.3 true REVPAR is a preferred measure of hotel performance over ADR. ch3. true The DuPont ratio is a combination of two ratios. These are the profit margin and the return on assets ratio. ch.3 false A share of Outback Steakhouse common stock sells for \$19. If the P/E ratio is 22, how much are the earnings per share? ch.3 0.86 Statement of retained earnings is the link between income statement and the balance sheet of a corporation ch.3 true The difference between an ordinary annuity and an annuity due is the ‘Timing of Payments’. ch.5 True Tom can afford to pay \$12,000 at the end of each of the next 25 years to repay a home loan. If the interest rate is 5.50%, what is the most Tom can borrow? ch.5 \$160,967.19 What happens to the present value of an annuity as the interest rate increases? ch.5 Decreases Suppose you are borrowing money at a 10% annual nominal interest rate. To pay as little as possible, which one of the following compounding periods should you prefer? ch.5 Annually You plan to invest \$2,500 at the beginning of each of the next 30 years. If the investment earns 7% annually, what is the investment worth at the end of 30 years? ch.5 \$252,682.60 What is the future value of \$2,500 invested at a 7% rate for 8 years? ch.5 \$4,295.47 What is the present value of \$2,000 to be received in 7 years, if 5% is the proper discount rate? ch.5 \$1,421.36 You plan to invest \$2,500 at the end of each of the next 30 years. If the investment earns 7% annually, what is the investment worth at the end of 30 years? ch5. \$236,151.97 If an investment of \$ 2,000 into an account promises to pay you \$120 forever, what is the interest rate for this investment? ch.5 6% A money multiplier certificate is selling for \$10,000 today and promises to be worth \$16,000 in 6 years. What is the rate of return on this investment? ch.5 8.15% Tom can afford to pay \$15,000 at the end of each of the next 25 years to repay a home loan. If the interest rate is 5.50%, what is the most Tom can borrow? ch.5 \$201,208.82 Suppose you are investing money at a 10% annual nominal interest rate. To earn as much as possible, which one of the following compounding periods should you prefer?ch.5 Daily You plan to invest \$2,200 at the beginning of each of the next 27 years. If the investment earns 5% annually, what is the investment worth at the end of 27 years? ch.5 \$126,285.68 What is the future value of \$2,200 invested at a 5% rate for 7 years? ch.5 \$3,095.62 What is the present value of \$7,000 to be received in 6 years, if 6% is the proper discount rate? ch.5 \$4,934.72 You plan to invest \$2,000 at the end of each of the next 25 years. If the investment earns 7% annually, what is the investment worth at the end of 25 years? ch.5 \$126,498.08 If an investment of \$ 2,500 into an account promises to pay you \$175 forever, what is the interest rate for this investment? ch.5 7% A money multiplier certificate is selling for \$8,000 today and promises to be worth \$10,000 in 3 years. What is the rate of return on this investment? ch.5 7.72%
Share