Given the following information calculate Fund PSUs alpha: T-Bill Return: 3% S&P 500 Return: 7% Beta: 0.9 Beginning Fund Value: $14 Ending Fund Value: $16
A) -7.7%B) -5.0%C) 6.6%D) 4.0%E) 7.7%
2.
Given the following information calculate the firms beta: Expected Return: 6% Risk Free Rate: 3% Market Return: 9% Market Risk Premium: 6%
A) 0.50B) 0.33C) 1.00D) 0.97E) 0.67
3.
An investor will receive a 14-year annuity of $3800 per year. If the annual interest rate is 5.5% what is the present value of this annuity?
A) $77112B) $69091C) $4935D) $36441E) $53200
4.
Elliot makes a payment of $2800 a year on her car. At the end of 8 years shes paid off her initial $20000 loan. What was her approximate interest rate?
A) 27.9%B) 2.6%C) 5.8%D) 1.5%E) 12.0%
5.
Your friend wants to borrow $4000 from you and gives you three options for repayment. Assuming a discount rate of 5% which of the following options should you choose? Option A: $800 a year for the next 5 years Option B: $4200 lump sum paid 3 years from now Option C: $550 a year for the next 10 years
A) Option B because it is the highest net present valueB) You are indifferent because they all have the same net present valueC) Option A because it is the highest net present valueD) Option C because it is the highest net present valueE) You should not lend the money because all options are negative NPV investments
6.
Your Aunt needs $12000 in 4 years. Her investment will return 6.5%. How much money does she need to invest today to reach her goal?
A) $15438B) $3502C) $41109D) $5288E) $9328
7.
Global Corp. borrows $95 million at a rate of 6.00% to finance a new plant. They will fully repay the loan with annual payments in 8 years. How much will they pay in total over the 8 years to repay the loan in full?
A) $122387316B) $129730555C) $333536805D) $95000000E) $140600000
8.
Rachel will inherit a lump sum amount of $780000 that is payable in 10 years. The current rate of return is 7.5%. What is the present value of the lump sum?
A) $160760B) $585000C) $83850D) $378451E) $1607605
9.
Which of the following is true regarding interest rates?
A) Increases in interest rates lead to increases in bond prices.B) The effect of a change in interest rates on bond and stock prices is unknown.C) Interest rates do not affect stock or bond prices.D) Increases in interest rates lead to increases in stock prices.E) Increases in interest rates lead to decreases in bond prices.
10.
Mary plans on retiring in 30 years by purchasing a house on the coast. He estimates he will need $850000 saved at that time and is starting now. What payment would Mary need to make yearly into a savings account with a tax-rate of 30% and an average market return of 7.5%?
A) $8221B) $8483C) $12254D) $944E) $28333
11.
Calculate the firms expected return using the capital asset pricing model: Risk Free Rate: 7% Market Return: 10% Beta: 0.85 Standard Deviation: 4% Debt: Equity Ratio: 60%
A) 5.12%B) 9.55%C) 15.53%D) 2.55%E) 10.40%
12.
Sam took out a $450000 home mortgage with 6% interest rate and equal annual payments. How much will he have to pay annually to repay the loan in 20 years?
A) $22500B) $18839C) $7016D) $27000E) $39233
13.
If a stock has a beta of 4 what can one infer about the expectations of that stock relative to the market?
A) The stock is as risky as the market.B) The stock is four times as risky as the market.C) The stock will tend to double market movements.D) The stock’s expected return is equal to that of the market.E) The stock will tend to have movements equal to the market.
14.
Which of the following is true?
A) The higher the discount rate the lower the NPV of an investmentB) A positive NPV means that the present value of future cash flows are less than the amount investedC) A positive alpha means that a firms actual return was lower than its expected returnD) The payback period adjusts for the risk of an investmentE) If the NPV of an investment is positive the IRR of the investment is less than the discount rate
15.
State College LLC recently bought a piece of machinery for $20 million and expects cash flows generated from the investment in the next three years to be: $12 million $14 million and $12 million. Using a discount rate of 8% calculate the NPV of the investment (rounded to the nearest million).
A) $13 millionB) $23 millionC) $18 millionD) $17 millionE) $38 million
16.
How much would you pay in total interest if you bought a car for $32000 that was fully financed with a 5% auto loan that lasted 7 years (assuming that you make payments annually)?
A) $1600B) $5000C) $8000D) $6712E) $36956
17.
Upon graduating from Penn State Christian has $52800 worth of student loans with an interest rate of 8.50%. How many years must the loan be if his annual payment budget is $9000 (Rounded to the nearest number)?
A) 10 YearsB) 8 yearsC) 6 YearsD) 5 YearsE) 12 Years
18.
If you took out a $350000 mortgage loan to be repaid over 30 years at 6.00% calculate the amount of principal reduction in the first year (assuming that you make payments annually).
A) $25840B) $3825C) $30010D) $16491E) $4427
19.
Dunder Mifflin invests in a new warehouse for $100000. The investment is expected to generate cash flows in the next 3 years of: $30000 $40000 and $80000. Calculate the IRR of the project.
A) 19.50%B) 12.5%C) 9.8%D) 4.0%E) 7.0%
20.
Given the following annual returns for Stock XYZ what does a $1000 investment grow to over the 5-year period? Year 1: -16% Year 2: 15% Year 3: 25% Year 4: -30% Year 5: -10%
A) $790B) $1350C) $761D) $1000E) $840
21.
Given the following information in which order would you choose the following projects based on the profitability index? Project A (NPV of cash flows: $90000 Investment Cost: $50000) Project B (NPV of cash flows: $100000 Investment Cost: $70000) Project C (NPV of cash flows: $170000 Investment Cost: $110000)
A) Project B Project C then Project AB) Project C Project B then Project AC) Project A Project C then Project BD) Project A Project B then Project CE) Project C Project A then Project B
22.
Woolridge LP is investing is considering investing in a project that will cost $90000 and will generate $30000 in cash flows for the next 5 years. Assuming a Discount Rate of 12% which of the following is true?
A) All of the above are trueB) The projects payback period is 5 yearsC) The projects profitability index is 1.2D) The projects NPV is $18143E) The projects IRR is 21.6%
23.
The _______ of a project is the discount rate that makes the _______ of an investment equal to zero.
A) Discounted cash flow NPVB) IRR NPVC) NPV IRRD) Discount rate IRRE) Expected rate of return NPV
24.
A companys investment rule when using the calculated Net Present Value (NPV) of a project is:
A) Invest in the project if the NPV is negative.B) Invest in the project only if its NPV is higher than last years project.C) Invest in the project if the NPV is positive.D) Invest in the project only if the NPV is zero.E) NPV is not useful in making investment decisions.
25.
Discounted Cash Flow analysis is used to determine the value of an investment based on the _______ value of _______ cash flows discounted for risk and timing.
A) future presentB) present futureC) expected presentD) forecasted futureE) current present