Question 2 What is the present value of $100 to be received in 3 years given a 5
ID: 2699783 • Letter: Q
Question
Question 2
What is the present value of $100 to be received in 3 years given a 50% discount rate?
Answer
$21.9
$26.2
$29.6
$55.0
1 points
Question 3
What rate of return should an investor expect for a stock that has a beta of 1.0 when the market is expected to yield 10% and Treasury bills offer 2%?
Answer
8.0%
10.0%
12.0%
None of the above.
1 points
Question 4
What is the IRR of a project with the following cash flows: Year 0: -156, Year 1: 12, Year 2: 130, and Year 3: 140 and Year 4: -19?
Answer
20.1%
23.7%
25.2%
26.7%
1 points
Question 5
What would you estimate to be the required rate of return for preferred equity if a preferred stock has a constant dividend of $10 per year and sells for $40?
Answer
10%
20%
25%
40%
1 points
Question 6
An Aaa rated bond should have a higher YTM than a Baa rated bond.
True
False
1 points
Question 7
A sign that a firm is efficient is a:
Answer
(A) low average collection period.
(B) low day's sales in inventories.
(C) low asset turnover.
(A) and (B)
(A), (B) and (C)
1 points
Question 8
Which of the following is used to reduce agency problems:
Answer
Fixed salaries
Complimentary meal program
Accounting audits
All of the above
None of the above
1 points
Question 9
What is the future value of $10 if it is invested for three years with monthly compounding at a 12% APR?
Answer
14.21
14.31
14.92
15.12
1 points
Question 10
What is the NPV of a project with the following cash flows and a 9% discount rate: Year 0: -156, Year 1: 12, Year 2: 130, and Year 3: 140 and Year 4: -19?
Answer
54
57
59
66
$21.9
$26.2
$29.6
$55.0
Explanation / Answer
Q2
PV = 100/(1.5)^3 = 29.6 --- option 3
Q4
IRR = 0.2524 = 25.24% --- option 3
Q5
rate of return = 10/40 = 0.25 * 100 = 25% - option 3
Q6
False..it should have low risk that Baa... so yield should be low
Q9
FV = 10*(1.01)^36 = $14.307688
Q10
NPV = 215.0732 - 156 = 59.0732 --- option 3
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