You are negotiating with a prospective employer. They offer you a signing bonus of $2,000,000 today or a lump sum payment of $2,500,000 three years from now. If you can earn 7% per year on your invested funds, which of the following is true?

On your first birthday you were given $1, in a savings account earning 5% interest compounded annually. How much will you have in the account on your 40th birthday if you don’t withdraw any money before then?

Your aunt just told you of a trust fund which will pay you $100,000 at the end of 20 years. If you could invest that money today at 6% compounded semi-annually what is the present value of your trust fund?

If you have $1,000 today, and can earn 4.5% interest compounded quarterly on you money, how much will you have at the end of 4 years?

If you have $1,000 today, and want to save for a new car, and can get 4.0% compounded semi-annually, how much must you save each month to have $10,000 at the end of 3 years?

In order to help you through college, your parents just deposited $30,000 into a bank account paying 8% interest. Starting next year, you plan to withdraw equal amounts from the account at the end of each of the next four years. What is the MOST you can withdraw annually?

If you buy a new car, and after your $1,000 down payment the payments are $314.56 per month for 60 months, @ 8.5% compounded monthly, how much did you pay for the car?

What is the effective rate of 8.5% compounded quarterly?

If you will put $100 per month in a savings account, and can earn 3.0% compounded continuously on that account, how much will you have at the end of 6.5 years?

If you borrowed $5,000 to be repaid at 9.5% interest compounded monthly over the next 24 months, how much would you still owe after the 18th. payment?

Dizzy Corp. $1,000 face amount bonds bearing a coupon rate of 15%, pays interest semiannually, have two years remaining to maturity, and are currently priced at $980 per bond. What is their yield to maturity?

What is the current market value of a bond that will pay a semiannual interest payment of $50 each over the remainder of its 20 year life? Assume the bond has a $1,000 face value and an 8% YTM.

Suppose a share of preferred stock will pay an annual dividend of $2.90 indefinitely. Returns on the stock of firms like this are currently running 15%. What is the value of one share of stock?

Suppose Pale Hose, Inc. has just paid an annual dividend of $1.40 per share. Sales and profits for Pale Hose are expected to grow at a rate of 5% per year. Its dividend is expected to grow by the same amount. If the required return is 10%, what is the value of a share of Pale Hose?

You are considering a project that costs $300 and has expected cash flows of $110, $121 and $133.10 over the next three years. If the appropriate discount rate for the project’s cash flows is 10%, what is the net present value of this project?

Consider the following cash flows, what is the IRR?

Year 0 1 2 3

CF -35,000 $28,000 $15,000 $9,000

Risk that affects a very large number of assets or companies, is called:

If RM = 14%, RF = 2.5%, and Beta = 1.3, what is the (approx.) ROR?

A portfolio is a(n):

The concept of investing in a variety of negatively correlated assets to reduce risk is referred to as:

The return on which one of the following is used as the risk-free rate of return?

A sunk cost is:

The cash generated from a firm’s normal business activities is referred to as the firm’s:

If a firm has a 100 percent dividend payout ratio, then the internal growth rate of the firm is:

If you want to compute the weighted average cost of capital for a company, you need to know the;

If you have the weighted average cost of capital you can

The cash flow from stockholders plus the cash flow from creditors should be equal to

The difference between an ordinary annuity and an annuity due is

A AAA bond rating means

The concept of a risk – return tradeoff is based on the idea that

The price is based on these factors:

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