1. The purchase and sale of securities after the original issuance occurs in the
ID: 2638719 • Letter: 1
Question
1. The purchase and sale of securities after the original issuance occurs in the: (Points : 5) Primary market.Secondary market.
Dealer market.
Auction market.
Liquidation market. Question 2.2. Financial leverage refers to: (Points : 5) The amount of debt used in a firm's capital structure.
The ratio of retained earnings to shareholders' equity.
The ratio of paid-in surplus to shareholder's equity.
The ratio of cost-of-goods-sold to total sales.
The amount of receivables present in the firm's asset structure. Question 3.3. The receivables turnover ratio is measured as: (Points : 5) Sales plus accounts receivable.
Sales divided by accounts receivable.
Sales minus accounts receivable, divided by sales.
Accounts receivable times sales.
Accounts receivable divided by sales. Question 4.4. The interest rate used to calculate the present value of future cash flows is called the __________ rate. (Points : 5) free interest
annual interest
compound interest
simple interest
discount Question 5.5. You have $800 that you would like to invest. You have 2 choices: Savings account A which earns 8% compounded annually, or savings account B which earns 7.9% semiannually. Which would you choose and why? (Points : 5) A because it has a higher effective annual rate.
A because it has a higher quoted rate.
B because it has a higher effective annual rate.
B because the future value in one year is lower.
B because it has the higher quoted rate. Question 6.6. A bond with a face value of $1,000 that sells for less than $1,000 in the market is called a: (Points : 5) Par bond.
Discount bond.
Premium bond.
Zero coupon bond.
Floating rate bond. Question 7.7. The written, legally binding agreement between the corporte borrower and the lender detailing the terms of a bond issue is called the : (Points : 5) Indenture.
Covenant.
Terms of trade.
Form 5140.
Call provision. Question 8.8. A bond with an annual coupon of $100 originally sold at par for $1,000. The current market interest rate of this bond is 9%. Assuming no change in risk, this bond will sell at a ____________ today and present the seller with a capital ___________. (Points : 5) premium; gain
discount; gain
premium; loss
discount; loss
discount; neither loss not gain Question 9.9. You currently have $7,200 in your investment account. You can earn an average rate of return of 11.7% per year. How long will you have to wait unil your account is worth $50,000? (Points : 5) 9.47 years
11.28 years
14.67 years
17.51 years Question 10.10. Felix wants to have $28,000 four years from now to buy a new car. He wants to make one deposit to fund this expenditure. How much does he have to deposit if he will earn 5.5 percent per year on his investment? (Points : 5) $22,602.07
$24,414.14
$25,003.09
$26,540.28 Question 11.11. Fifteen years ago, your parents opened an investment account with an initial deposit of $5,000. Today, that account is worth $39,533.32. What average annual rate of return did they earn on their investment? (Points : 5) 14.47%
14.59%
14.78%
15.03% Question 12.12. You purchased a new sports car 40 years ago at a cost of $3,900. Today, you sold that car for $97,500. What annual rate of return did you earn on the vehicle? (Points : 5) 7.62%
7.99%
8.04%
8.38% Question 13.13. You just found your dream car. The car will cost you $29,700. The dealer will lend you the entire amount at 5.9% interest, compounded monthly. for 60 months. What is the amount of the monthly payment? (Points : 5) $426.78
$503.19
$572.80
$604.68 Question 14.14. The Corner Bank is offering you a credit card with an APR of 12.9%. The bank compounds the interest rate on a monthly basis. What is the effective annual rate? (Points : 5) 13.69%
13.87%
14.03%
14.14% Question 15.15. Suzie has $16,000 in her investment account today. She saves $500 a quarter and earns 8% interest compounded quarterly. How much money will she have in her account three years from now? (Points : 5) $16,821.87
$18,509.53
$22,300.16
$26,997.91 Question 16.16. You just won a prize and will receive $5,000 today plus $5,000 one year from now. What is this prize worth to you today, if you can earn 9% on your investments.? (Points : 5) $9,174.31
$9,587.16
$10,000.00
$10,450.00 Question 17.17. If a bond's coupon rate exceeds its yield to maturity, the bond is selling at ____________. (Points : 5) a discount
par
premium Question 18.18. A 9%, $1,000 bond matures in 16 years, pays interest semi-annually, and has a yield-to-maturity of 9.68%. What is the current market price? (Points : 5) $938.47
$945.23
$1,028.60
$1,108.19 Question 19.19. A 6% annual coupon bond has a face value of $1,000, a market value of $1,012.40, and a yield-to-maturity of 5.87%. How many years is it until the bond matures? (Points : 5) 7.77 years
7.84 years
14.27 years
14.39 years Question 20.20. Market interest rates and bond prices are __________. (Points : 5) unrelated
inversely related
directly related Question 21.21. Assume that before the new project begins the NWC was $125,000. During the life of the project the NWC increases to $500,000. What will be the NWC when the project is over? (Points : 10) $625,000
$500,000
$375,000
125,000
390,000 Question 22.22. Keith Stone has 10-year old daughter, Kate, who will be entering college in 8 years. Keith estimate college costs to be $20,000, $22,000, $25,000 and $28,000 payable at the beginning of each of Kate 1. The purchase and sale of securities after the original issuance occurs in the: (Points : 5) Primary market.
Secondary market.
Dealer market.
Auction market.
Liquidation market.
Explanation / Answer
1. B Secondary Market
2. A. The amount of debt used in a firm's capital structure.
3. B. Sales divided by accounts receivable.
4 .E. discount
5. C. B because it has a higher effective annual rate
6 . B. Discount bond.
7. A. Indenture
8 . A. premium; gain
9. D. 17.51 years
10. A. $22,602.07
11. C. 14.78%
12. D. 8.38%
13. C $572.80
14. A 13.69%
15. D. $26,997.91
16. B $9,587.16
17. A. a discount
18. B. $945.23
19. C 14.27 years
20. B inversely related
21. D 125,000
22. A $8,011
23. B. $10,729
24. C. - $6,000
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