Subject: Business / Finance
QUESTION 1Calculating the present value of a future sum is referred to by which of the following?
D. Compounding2.5 pointsQUESTION 2What is today’s value of a $1000 par value bond that has a 5% coupon payment with interest paid semi-annually, which has 3 years until maturity. The bond is priced to yield at 8%?
C.$1051.372.5 pointsQUESTION 3You want to save for a trip to Cancun 3 years from now when you graduate. Assuming a 6 annual interest rate (compounded annually), how much must you deposit today to have exactly 1,843.87 dollars to take your trip when you graduate?2.5 pointsQUESTION 4You decide to deposit 1,355.14 dollars in an account that earns 8 percent annual interest (compounded annually). How much is in the account 16 years from now?2.5 pointsQUESTION 5You want to buy an used car 4 years from now when you graduate. Assuming a 6 annual interest rate (compounded annually), how much must you deposit today to have exactly 2,282.98 dollars to purchase the car when you graduate?2.5 pointsQUESTION 6Individual and small investor can also do stealth tradingTrueFalse2.5 pointsQUESTION 7The Future value equation is
B.FV = PV(1+i)n
C.FV = PV(1-i)n
D.FV =PV(1 x i)n2.5 pointsQUESTION 8What is the effective annual interest rate on an account that has a 3.12 percent annual interest rate and is compounded monthly? (enter your response as a percent excluding the percentage sign, i.e. 6.20 for 6.2%)2.5 pointsQUESTION 9How do you know whether a company is overvalued?
A.When PEG ratio is < 1 then the company is overvalued
B.When PEG ratio is > 1 then the company is overvalued
C.When PEG ratio is = 0 then the company is overvalued2.5 pointsQUESTION 10Assume that you put 168.45 dollars in an account that earns simple interest at a 8.4 percent annual rate. How much is in your account after 16 years from now?2.5 pointsQUESTION 11If you deposit 117.89 dollars in an account today, and the account balance is 220.51 dollars 8 years from now, what annual interest rate did you receive on your funds? (assume annual compounding and enter your response as a percent excluding the percentage sign i.e. 6.7)2.5 pointsQUESTION 12Stealth trading is carried out to hide the trade motives of the traderTrueFalse2.5 pointsQUESTION 13If you deposit $349.42 in an account today that earns a 4% annual interest rate that is compounded quarterly, how much will be in the account after 9 years?2.5 pointsQUESTION 14What is today’s value of a $500 par value bond that has a 5% coupon payment with interest paid semi-annually, which has 5 years until maturity. The bond is priced to yield at 8%?
C.439.162.5 pointsQUESTION 15If you invested $6,760 today in a savings account that offers 6% interest (compounded annually), how long will it take for you to have $22,445 in your account?2.5 pointsQUESTION 16Illegal insider trading is when hedge funds and other institutional investors trade shares on the basis of material nonpublic informationTrueFalse2.5 pointsQUESTION 17Assuming that you earn interest on money, it is possible to directly compare cash flows occurring at different points in time without discounting/compounding.TrueFalse2.5 pointsQUESTION 18If you deposit 556.74 dollars in an account today that earns a 12 percent annual interest rate that is compounded monthly, how much will be in the account after 5 years?2.5 pointsQUESTION 19Price earnings ratio is defined a
A.Current stock price / Future earnings per share (EPS)
B.Expected stock price/ 52 week historical earnings per share(EPS)
C.Current stock price / Earnings per share2.5 pointsQUESTION 20What do you mean by “buying on margin” in stock markets?
A.Borrow upto 50% of the investment value.
B.Borrow upto 80% of the investment value.
C.Borrow upto 100% of the investment value.2.5 pointsQUESTION 21Which of the following is true about options?
A.Selling option is safer than buying
B.Buying and selling options has same risk
C.Buying option is safer than selling2.5 pointsQUESTION 22If you deposit 829.87 dollars in an account today that earns a 4 percent annual interest rate that is compounded monthly, how much will be in the account after 10 years?2.5 pointsQUESTION 23Stealth trading involves breaking larger trade sizes in smaller chunks.TrueFalse2.5 pointsQUESTION 24What other types of information is available for a stock on a site like Yahoo Finance?
A.Information relevant to the peers of the company, such as Twitter’s news for Facebook
B.What the accountant said to the Chief Financial Officer in a closed door meeting.
C.What the CEO is planning to do with his own share of the company, 15 years forward.2.5 pointsQUESTION 25Which of the following happens after a Bond rating goes down?
B.Increases borrowing cost
C.Increases value2.5 pointsQUESTION 26Decimalization means the unit of the stock price (increase or decrease)TrueFalse2.5 pointsQUESTION 27What is a call option?
A.Contract which provides the obligation but not right to exercise the option
B.Contract which provides the right but not obligation to exercise the option
C.Contract which provides the right and an obligation to exercise the option2.5 pointsQUESTION 28What is the main difference between a stock and a bond?
A.Bonds provide higher returns than stocks
B.Bonds have finite maturity and stock do not have finite maturity
C.Stocks are cheaper than bonds2.5 pointsQUESTION 29Which of the following describes the cost of your next best alternative?
A. Interest verification
B. Compounded value
C. Alternating evaluation
D. Opportunity cost2.5 pointsQUESTION 30Legal insider trading when senior company officials trade their own company shares (legal as long as disclosure requirements are followed)TrueFalse2.5 pointsQUESTION 31What is the current price of a bond if it is priced to yield 3 percent, has a $1,000 face value, has 10 years to maturity, pays semiannual coupon payments, and has a coupon rate of 6 percent?2.5 pointsQUESTION 32What is the empirical research finding on insider trading?
A.Rapid price discovery
B.High abnormal returns
C.Higher liquidity2.5 pointsQUESTION 33If you deposit 75.89 dollars in an account today, and the account balance is 328.49 dollars 7 years from now, what annual interest rate did you receive on your funds? (assume annual compounding and enter your response as a percent excluding the percentage sign i.e. 6.7)2.5 pointsQUESTION 34Duff Inc. paid a 2.74 dollar dividend today. If the dividend is expected to grow at a constant 4 percent rate and the required rate of return is 9 percent, what would you expect Duff’s stock price to be 3 years from now?2.5 pointsQUESTION 35What types of information do analysts provide
A.Forward looking earnings per share target estimates.
B.Reasons why people purchased the stock around the time of the Great Depression forwards.
C.The best guess for future valuation of the stock with no explanation as to why.2.5 pointsQUESTION 36The main assumption in bond valuation is?
C.No bankruptcy costs2.5 pointsQUESTION 37What does ‘Previous Close’ mean?
A.The price at which the asset closed yesterday.
B.The price which the asset will be valued at at 4:00 pm the following day.
C.The date of last issuance of new shares by the company whose shares are being examined.2.5 pointsQUESTION 38Which of the following is not the two main parts in bond payments?
A.An annuity series comprising of coupon payments
B.A single sum payable at the end
C.Future value of the face value2.5 pointsQUESTION 39Which of the following describes the growth of money under compound interest?
A. Linear growth
D. Exponential growth2.5 pointsQUESTION 40A bond is currently priced to yield 7 percent and is selling for 734.51 dollars. If the bond pays semiannual coupon payments, has a $1,000 face value, and has 11 years left to maturity, what is the coupon rate for the bond? (enter your response as a percent excluding the percentage sign, i.e. 6.23% would be 6.23)2.5 pointsQUESTION 41Which of the following would help you understand more about the value of a stock?
A.Looking deep into your heart and determining what a fair price is for the value of the stock, based on future earnings potential.
B.A historical biography on the life of the top five board members.
C.Price/Earnings Ratio, Earnings / Share or EPS, the bid and ask price, ranges, volume, and market cap2.5 pointsQUESTION 42You have $2000 today that you can invest at 12% for the next 2 years at monthly compounding. How much will you have in 2 years ?
D.$2539.402.5 pointsQUESTION 43Valuing a bond is relatively simpler than valuing a stockTrueFalse2.5 pointsQUESTION 44Which of the following is not true about stock options?
A.Stock options are purchased by paying option premium
B.No intrinsic value
C.Option price depends on the underlying value2.5 pointsQUESTION 45Which of the follow is true about options?
A.Option does not give the right but obligation to buy
B.No intrinsic value
C.Are legal contracts between two parties2.5 pointsQUESTION 46Company Inc. paid a 1.42 dollar dividend today. If the dividend is expected to grow at a constant 1 percent rate and the required rate of return is 9 percent, what would you expect Company’s stock price to be?2.5 pointsQUESTION 47Assume that you put 542.62 dollars in an account that earns simple interest at a 9.3 percent annual rate. How much is in your account after 8 years from now?2.5 pointsQUESTION 48Tesla stock has just paid an annual dividend of $3. If Tesla’s dividends are expected to grow at a constant rate of 5% per year, and your required rate of return is 8%, what is the fair price of the stock today, based on this information.
C.$1562.5 pointsQUESTION 49Stealth trading helps to make abnormal profitsTrueFalse2.5 pointsQUESTION 50When you evaluate the broker’s/analyst’s recommendations, which of the following are important to consider?
A.Whether the stock recommended provide you good returns?
B.Whether the analyst has any conflict of interest
C.The stock recommended by analyst will always provide high returns.