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WorksheetsMidterm Exam_UIC_Fin002
Total questions: 40
Worksheet time: 2hrs 36mins
You invest P475 in an account that pays 3% simple interest annually. How much money do you have after five years?
P546.24
P544.46
P543.25
P546.25
You invest P800 in an account that pays 6% interest, compounded annually. How much money do you have after five years? Round your answers to the nearest cent.
P898.09
P1070.58
P1710.58
P975.68
Katie invested P6,500 in a savings account earning 12% interest compounded quarterly. What is the future value of this investment after five years? Round your answers to the nearest cent.
P1,235,322.65
P6,895.85
P11,739.72
P6,901.32
Yolanda invests P7,300 at 6% interest compounded annually for four years. What is the future value of this investment?
P9,216.08
P6,236.83
P9,246.57
P6,240.07
The "time value of money" means that
money paid out today less value than if the money is paid out in the future
money received today is worth more than the same amount of money received in the future
the more time a person has to save, the lower the return on the money
the longer money is held, the less likely it will be spent
Process of changing future value to the present value known as
Compound
Discount
Simple interest
Principal
Process of changing present value to the future value known as
Principal
Discount
Simple interest
Compound
Lisa wants to know what the value of her RM1,000 will be if she invests it for 3 years at a given rate. What is Lisa trying to find?
Present value
Future value
Effective annual rate (EAR)
Discount rate
Cash received today is preferred to cash received in the future
True
False
Today, you deposit P500 into Bank A saving account that pays 8% interest per year. How much will you have in five years?
P738.73
P734.66
P834.66
P850.66
What is the present value of P10,000 to be received in year 10 at an interest rate of 10%?
4,855.43
5, 855.43
3,855.43
6, 855.43
You invest P700 in an account that pays 8% interest, compounded annually. How much money do you have after six years? Round your answer to the nearest cent.
P1,110.81
P1, 111.81
P1, 112.81
P1,101.81
Time‑value of money is based on the belief that a dollar that will be received at some future date is worth more than a dollar today.
TRUE
FALSE
Future value is the value of a future amount at the present time, found by applying compound interest over a specified period of time.
TRUE
FALSE
Interest earned on a given deposit that has become part of the principal at the end of a specified period is called compound interest.
TRUE
FALSE
It is defined as,
"The process of accumulating interest on an investment over time to earn more interest."
Compounding
Future Value
Simple Interest
Present Value
TRUE OR FALSE.
The time value of money is the concept that a sum of money is worth more now than the same sum will be at a future date due to its earnings potential in the interim.
TRUE
FALSE
The rate used to calculate the present value of future cash flows, is known as
Discount Cash Flow
Discount Rate
Discount
Present Value
Suppose you need P200 to buy textbooks next year. You can earn 5 percent on your money. How much do you have to put up today?
Answer needs to have two decimal points.
190.35
190.64
190.51
190.48
Which one of the following types of securities has no priority in a bankruptcy proceeding?
Convertible bond
Senior debt
Common stock
Preferred stock
Straight bond
What is the market called that allows shareholders to resell their shares to other investors?
Primary
Proxy
Secondary
Inside
Initial
The Pancake House pays a constant annual dividend of P1.25 per share. How much are you willing to pay for one share if you require a 15 percent rate of return?
P7.86
P8.33
P10.87
P11.04
P11.38
Healthy Foods just paid its annual dividend of P1.45 a share. The firm recently announced that all future dividends will be increased by 2.8 percent annually. What is one share of this stock worth to you if you require a 14 percent rate of return?
P12.56
P12.95
P13.31
P13.68
P14.07
Plastics, Inc. will pay an annual dividend of P1.85 next year. The company just announced that future dividends will be increasing by 2.25 percent annually. How much are you willing to pay for one share of this stock if you require a 16 percent return?
P13.45
P13.61
P13.76
P14.02
P14.45
Which statement about common stockholders is incorrect?
Common stockholders have a residual claim on the firm’s cash flows.
Common stockholders have first claim on the firm’s assets during bankruptcy
Common stockholders have a voting right.
Common stockholders are the ultimate owners of a corporation.
Assume that the dividend on Central Power Company's P3.25 preferred stock issue is paid annually at the end
of the year. Determine the price of this issue if its return is 12%.
P3.25
P39
P12
P27.08
Preferred stock is similar to a bond in the following way:
Preferred stock always contains a maturity date.
Both investments provide a stated income stream.
Both contain a growth factor similar to common stock.
Both provide interest payments.
Stimpson Inc. preferred stock pays a P0.50 annual dividend. What is the value of the stock if your required rate of return is 10%?
P0.05
P0.50
P5.00
P50.00
The expected rate of return on a share of common stock whose dividends are growing at a constant rate (g) is which of the following, where D1 is the next dividend and Vc is the current value of the stock?
(D1 + g)/Vc
D1/Vc + g
D1/g
D1/g + Vc
What is a bond?
an agreement or friendship
binding security
something that binds, fastens, confines, or holds together
a type of debt a company issues to investors
A bond issued by a corporation is called a ________ .
corporate bond
market share
stock option
share of stock
The rate of interest on a bond is called the ________ .
bond rate
coupon rate
discount rate
interest rate
What is a coupon?
something you use in a supermarket to decrease your cost
an asset bought in the stock market
used in the stock market to lessen the initial cost of stocks
the interest rate on a bond at the time it is issued
A bond which has a yield to maturity greater than its coupon rate will sell for a price
below par
at par
above par
equal to face value of bond plus the interest payments
A bond with a coupon rate of 7% and a discount rate of 6% is trading ...
Par
Discount
Premium
A P1,000 par value bond makes annual coupon payment of P75. If it offers a yield to maturity of 7.5 percent, what is the price of the bond?
P75
P56.25
P1,000
P100
If a bond's yield to maturity is lower than its coupon rate, the bond will sell at a discount.
True
False
