Question 1

What is the future value of the following cash flows at the end of year 3 if the interest rate is 6%? The cash flows occur at the end of each year.

Accepted Answer

A)  $15,916.78 
B)  $18,109.08 
C)  $18,246.25 
D)  $19,341.02 
E)  $19,608.07 
A)  $15,916.78 
B)  $18,109.08 
C)  $18,246.25 
D)  $19,341.02 
E)  $19,608.07

Question 2

Your aunt,in her will,left you the sum of $5,000 a year forever with payments starting immediately. However,the news is better. She has specified that the amount should grow at 5% per year to maintain purchasing power. Given an interest rate of 12%,what is the PV of the inheritance?

Accepted Answer

$5,000 + $

Question 3

The great,great grandparents of one of your classmates sold their factory to the government 104 years ago for $150,000. If these proceeds had been invested at 6%,how much would this legacy be worth today? Assume annual compounding.

Accepted Answer

A)  $936,000.00 
B)  $1,086,000.00 
C)  $60,467,131.54 
D)  $60,617,131.54 
E)  $64,254,159.44 
A)  $936,000.00 
B)  $1,086,000.00 
C)  $60,467,131.54 
D)  $60,617,131.54 
E)  $64,254,159.44

Question 4

If a student borrows $20,000 to start a business as a 5 year,10% loan,the annual payment is

Accepted Answer

A)  $2,000.00 
B)  $3,275.95 
C)  $4,000.00 
D)  $5,275.95 
E)  None of these. 
A)  $2,000.00 
B)  $3,275.95 
C)  $4,000.00 
D)  $5,275.95 
E)  None of these.

Question 5

You are considering a project with the following cash flows:   What is the present value of these cash flows,given a 3% discount rate?

Accepted Answer

A)  $13,732.41 
B)  $13,812.03 
C)  $14,308.08 
D)  $14,941.76 
E)  $14,987.69 
A)  $13,732.41 
B)  $13,812.03 
C)  $14,308.08 
D)  $14,941.76 
E)  $14,987.69

Question 6

You hope to buy your dream house six years from now. Today your dream house costs $189,900. You expect housing prices to rise by an average of 4.5% per year over the next six years. How much will your dream house cost by the time you are ready to buy it?

Accepted Answer

A)  $240,284.08 
B)  $246,019.67 
C)  $246,396.67 
D)  $246,831.94 
E)  $247,299.20 
A)  $240,284.08 
B)  $246,019.67 
C)  $246,396.67 
D)  $246,831.94 
E)  $247,299.20

Question 7

Today,you signed loan papers agreeing to borrow $4,954.85 at 9% compounded monthly. The loan payment is $143.84 a month. How many loan payments must you make before the loan is paid in full?

Accepted Answer

A)  29.89 
B)  36.00 
C)  38.88 
D)  40.00 
E)  41.03 
A)  29.89 
B)  36.00 
C)  38.88 
D)  40.00 
E)  41.03

Question 8

Today is January 1. Starting today,Sam is going to contribute $140 on the first of each month to his retirement account. His employer contributes an additional 50% of the amount contributed by Sam. If both Sam and his employer continue to do this and Sam can earn a monthly rate of ½ of 1 percent,how much will he have in his retirement account 35 years from now?

Accepted Answer

A)  $199,45.944 
B)  $200,456.74 
C)  $249,981.21 
D)  $299,189.16 
E)  $300,685.11 
A)  $199,45.944 
B)  $200,456.74 
C)  $249,981.21 
D)  $299,189.16 
E)  $300,685.11

Question 9

What is the effective annual rate of 9.75% compounded continuously?

Accepted Answer

A)  9.99% 
B)  10.11% 
C)  10.24% 
D)  10.28% 
E)  10.30% 
A)  9.99% 
B)  10.11% 
C)  10.24% 
D)  10.28% 
E)  10.30%

Question 10

You retire at age 60 and expect to live another 27 years. On the day you retire,you have $464,900 in your retirement savings account. You are conservative and expect to earn 4.5% on your money during your retirement. How much can you withdraw from your retirement savings each month if you plan to die on the day you spend your last penny?

Accepted Answer

A)  $2,001.96 
B)  $2,092.05 
C)  $2,398.17 
D)  $2,472.00 
E)  $2,481.27 
A)  $2,001.96 
B)  $2,092.05 
C)  $2,398.17 
D)  $2,472.00 
E)  $2,481.27

Question 11

What is the effective annual rate if a bank charges you 7.64% compounded quarterly?

Accepted Answer

A)  7.79% 
B)  7.86% 
C)  7.95% 
D)  7.98% 
E)  8.01% 
A)  7.79% 
B)  7.86% 
C)  7.95% 
D)  7.98% 
E)  8.01%

Question 12

You are considering an annuity which costs $100,000 today. The annuity pays $6,000 a year. The rate of return is 4.5%. What is the length of the annuity time period?

Accepted Answer

A)  24.96 years 
B)  29.48 years 
C)  31.49 years 
D)  33.08 years 
E)  38.00 years 
A)  24.96 years 
B)  29.48 years 
C)  31.49 years 
D)  33.08 years 
E)  38.00 years

Question 13

Your great-aunt left you an inheritance in the form of a trust. The trust agreement states that you are to receive $2,500 on the first day of each year,starting immediately and continuing for fifty years. What is the value of this inheritance today if the applicable discount rate is 6.35%?

Accepted Answer

A)  $36,811.30 
B)  $37,557.52 
C)  $39,204.04 
D)  $39,942.42 
E)  $40,006.09 
A)  $36,811.30 
B)  $37,557.52 
C)  $39,204.04 
D)  $39,942.42 
E)  $40,006.09

Question 14

Your credit card company charges you 1.5% per month. What is the annual percentage rate on your account?

Accepted Answer

A)  12.00% 
B)  15.00% 
C)  15.39% 
D)  18.00% 
E)  19.56% 
A)  12.00% 
B)  15.00% 
C)  15.39% 
D)  18.00% 
E)  19.56%

Exam 4: Discounted Cash Flow Valuation

What is the future value of the following cash flows at the end of year 3 if the interest rate is 6%? The cash flows occur at the end of each year.

Your aunt,in her will,left you the sum of $5,000 a year forever with payments starting immediately. However,the news is better. She has specified that the amount should grow at 5% per year to maintain purchasing power. Given an interest rate of 12%,what is the PV of the inheritance?

The great,great grandparents of one of your classmates sold their factory to the government 104 years ago for $150,000. If these proceeds had been invested at 6%,how much would this legacy be worth today? Assume annual compounding.

If a student borrows $20,000 to start a business as a 5 year,10% loan,the annual payment is

You are considering a project with the following cash flows: What is the present value of these cash flows,given a 3% discount rate?

You hope to buy your dream house six years from now. Today your dream house costs $189,900. You expect housing prices to rise by an average of 4.5% per year over the next six years. How much will your dream house cost by the time you are ready to buy it?

Today,you signed loan papers agreeing to borrow $4,954.85 at 9% compounded monthly. The loan payment is $143.84 a month. How many loan payments must you make before the loan is paid in full?

What is the effective annual rate of 9.75% compounded continuously?

What is the effective annual rate if a bank charges you 7.64% compounded quarterly?

You are considering an annuity which costs $100,000 today. The annuity pays $6,000 a year. The rate of return is 4.5%. What is the length of the annuity time period?

Your great-aunt left you an inheritance in the form of a trust. The trust agreement states that you are to receive $2,500 on the first day of each year,starting immediately and continuing for fifty years. What is the value of this inheritance today if the applicable discount rate is 6.35%?

Your credit card company charges you 1.5% per month. What is the annual percentage rate on your account?

Introduction to Corporate Finance

Financial Statements and Cash Flow

Financial Statements Analysis and Financial Models

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Interest Rates and Bond Valuation

Stock Valuation

Risk and Return: Lessons From Market History

Return and Risk: the Capital Asset Pricing Model Capm

An Alternative View of Risk and Return: The Arbitrage Pricing Theory

Risk, Cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Long-Term Financing

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Valuation and Capital Budgeting for the Levered Firm

Dividends and Other Payouts

Raising Capital

Leasing

Options and Corporate Finance

Options and Corporate Finance: Extensions and Applications

Warrants and Convertibles

Derivatives and Hedging Risk

Short-Term Finance and Planning

Cash Management

Credit and Inventory Management

Mergers, Acquisitions, and Divestitures

Financial Distress

International Corporate Finance

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