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# 1. Chuck has \$2,500 invested in a bank that pays 4% annually.

### Resolved Question:

1. Chuck has \$2,500 invested in a bank that pays 4% annually. How long will it take for his funds to double? (Points : 4)
14.39
15.15
15.95
17.67

2. You plan to invest in bonds that pay 6.0%, compounded annually. If you invest \$10,000 today, how many years will it take for your investment to grow to \$30,000? (Points : 4)
12.37
13.74
15.27
18.85

3. A \$150,000 loan is to be amortized over 7 years, with annual end-of-year payments. Which of these statements is CORRECT? (Points : 4)
The annual payments would be larger if the interest rate were lower.
If the loan were amortized over 10 years rather than 7 years, and if the interest rate were the same in either case, the first payment would include more dollars of interest under the 7-year amortization plan.
The proportion of each payment that represents interest as opposed to repayment of principal would be higher if the interest rate were lower.
The proportion of each payment that represents interest versus repayment of principal would be higher if the interest rate were higher.

4.Which of the following would indicate an improvement in a company’s financial position, holding other things constant? (Points : 4)
The inventory and total assets turnover ratios both decline.
The debt ratio increases.
The profit margin declines.
The current and quick ratios both increase
10. Determining whether a firm's financial position is improving or deteriorating requires analyzing more than the ratios for a given year. Trend analysis is one method of measuring changes in a firm's performance over time. (Points : 4)
True
False

11. Tom O'Brien has a 2-stock portfolio with a total value of \$100,000. \$37,500 is invested in Stock A with a beta of 0.75 and the remainder is invested in Stock B with a beta of 1.42. What is his portfolio’s beta?
(Points : 4)
1.17
1.23
1.29
1.35

13. Which of the following statements is CORRECT? (Points : 4)
All else equal, senior debt generally has a lower yield to maturity than subordinated debt.
An indenture is a bond that is less risky than a mortgage bond.
The expected return on a corporate bond will generally exceed the bond's yield to maturity.
If a bond’s coupon rate exceeds its yield to maturity, then its expected return to investors exceeds the yield to maturity.

15. The standard deviation is a better measure of risk than the coefficient of variation if the expected returns of the securities being compared differ significantly. (Points : 4)
True
False

17. You are holding a stock with a beta of 2.0 that is currently in equilibrium. The required rate of return on the stock is 15% versus a required return on an average stock of 10%. Now the required return on an average stock increases by 30.0% (not percentage points). The risk-free rate is unchanged. By what percentage (not percentage points) would the required return on your stock increase as a result of this event?
(Points : 4)
36.10%
38.00%
40.00%
42.00%

24. Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows. (Points : 4)
The longer a project’s payback period, the more desirable the project is normally considered to be by this criterion.
One drawback of the regular payback for evaluating projects is that this method does not properly account for the time value of money.
If a project’s payback is positive, then the project should be rejected because it must have a negative NPV.
The regular payback ignores cash flows beyond the payback period, but the discounted payback method overcomes this problem