Question 1
1.

You plan to retire with \$750,000 in 20 years. How much should you deposit each month
into an account that pays 9.0% annual rate compounded monthly? (Note: Compounding
frequency is the same as the deposit frequency.)
A. \$ 811
B. \$ 988
C. \$ 925
D. \$ 1,053
E. \$ 1,123
F. \$ 1,196
G. \$ 866
H. \$ 1,273
6 points

Question 2
1.

(Note: This is a challenging question. Please attempt in the end.) Regina Silva is planning
for her retirement 25 years from now. She expects to live for 34 years after retirement. On
the day she retires, she would like to purchase a condominium in Florida for \$500,000.
Starting one month after her retirement, she would like to withdraw \$7,000 per month
from her retirement account for the next seventeen years, and then increase the monthly
amount to \$8,000 per month for the remaining seventeen years. At the time she passes on,
she would like to leave \$500,000 for charity. Finally, she would also like to see the
Olympics in Reo de Janeiro ten years from now. She expects that this trip will cost
\$7,500. She would like to make equal monthly deposits into her retirement account to
accomplish these objectives. She can earn 8.25 percent compounded monthly. Assume all
cash flows occur at the end of the month.
A. \$ 1,084
B. \$ 1,222
C. \$ 1,463
D. \$ 1,021
E. \$ 1,554
F. \$ 1,297
G. \$ 1,151
H. \$ 1,377
6 points

Question 3
1.

How long will it take for \$1,000 to grow to \$3,000 at a rate of 16 percent compounded
monthly?
A. 5.83 years
B. 6.69 years
C. 6.91 years
D. 7.35 years
E. 6.32 years
F. 6.17 years
G. 8.21 years
H. 7.67 years
6 points

Question 4
1.

Sungsam Company has total assets of \$200,000 and total debt of \$60,000. If it has 65,000
shares outstanding, what is the book value per share?
A. \$ 4.67
B. \$ 4.00
C. \$ 2.80
D. \$ 2.55
E. \$ 2.15
F. \$ 2.33
G. \$ 3.11
H. \$ 3.50
6 points

Question 5
1.

Lowell Corporation has a dividend payout ratio of 25 percent and a sustainable growth
rate of 10 percent. What is the companys return on equity (ROE)?
A. 0.24
B. 0.20
C. 0.18
D. 0.16
E. 0.14
F. 0.12
G. 0.26
H. 0.22
6 points

Question 6

1.

You just won the lottery! You wish to put enough money away so that you can withdraw
\$6,000 per month for 15 years. You can earn 9% rate on any funds you deposit. How
much will you have to deposit now to meet your goal? (Note: Compounding matches the
withdrawal frequency.)
A. \$ 745,691
B. \$ 473,650
C. \$ 714,970
D. \$ 777,845
E. \$ 591,560
F. \$ 765,313
G. \$ 785,850
H. \$ 666,870
6 points

Question 7
1.

You purchased a house for \$375,000 with twenty percent down payment and finance the
balance with a 30-year mortgage. Your monthly mortgage payment is \$2,600. What is the
effective annual rate of interest on the loan?
A. 7.53%
B. 6.99%
C. 10.31%
D. 11.22%
E. 8.12%
F. 8.77%
G. 9.50%
H. 12.27%
6 points

Question 8
1.

An investment offers to pay you \$15,000 per quarter for the next 10 years (The payments
start a quarter after you purchase the investment). If the interest rate is 12%, how much
should you pay for this investment?
A. \$ 346,722
B. \$ 554,755
C. \$ 522,754
D. \$ 453,053
E. \$ 592,454
F. \$ 416,066

G. \$ 485,410
H. \$ 383,353
6 points

Question 9
1.

You are planning to retire in 15 years with \$750,000. You can earn 9.0% compounded
quarterly. How much do you need to invest today?
A. \$ 228,587
B. \$ 147,283
C. \$ 181,396
D. \$ 197,361
E. \$ 156,323
F. \$ 210,517
G. \$ 170,463
H. \$ 244,343
6 points

Question 10
1.

The nominal rate of return on a risky security is 6.5 percent, and the same time the rate of
return on a security with no risk is 4.3 percent. What is the risk premium?
A. 3.55%
B. 3.35%
C. 4.85%
D. 2.59%
E. 3.85%
F. 3.07%
G. 4.35%
H. 2.11%
6 points

Question 11
1.

What is the total future value of the following set of cash flows at 8% rate?
Year
1
Cash Flow \$1300
A.
B.
C.
D.

2
\$1300
\$ (478)
\$ (597)
\$ (660)
\$ (726)

3
\$1300

4
\$1300

5
\$1,300

6
\$1300

E.
F.
G.
H.

\$ (794)
\$ (421)
\$ (367)
\$ (536)

6 points

Question 12
1.

Last year, Parking Corporation had net sales of \$3,050,000 and cost of goods sold of
\$1,800,000. Its depreciation charge was \$600,000 and selling, general, and administrative
expense was \$800,000. If the interest charge was \$35,000 and the tax rate is 30 percent,
what was the operating cash flow? Ignore any carry back or carry forward of loss for tax
purposes.
A. 400,000
B. 450,000
C. 100,000
D. 150,000
E. 350,000
F. 300,000
G. 200,000
H. 250,000
6 points

Question 13
1.

The Hoola Hoop Company has current assets of \$200,000. If the current ratio is 2.0 and
the quick ratio is 1.40, what is the value of inventory?
A. 65,000
B. 60,000
C. 90,000
D. 55,000
E. 80,000
F. 85,000
G. 75,000
H. 70,000
6 points

Question 14
1.

Student House of Pizza had net sales of \$425,000 last year. Its cost of goods sold was
\$120,000 and Selling, General and Administrative Expense was \$80,000 and interest was
\$1,430. It has 50,000 shares outstanding. It added \$35,000 to retained earnings after

paying a dividend of \$1.75 per share. If the companys tax rate is 30 percent, what was
the depreciation charge?
A. 12,856
B. 34,284
C. 55,713
D. 27,141
E. 48,570
F. 62,856
G. 41,427
H. 19,999
6 points

Question 15
1.

The nominal rate of return on a risky security is 8.16 percent, and the rate of return on
risk-free securities is 4 percent. What is the inflation rate if the pure rate is 3 percent?
A. 1.6537%
B. 1.5534%
C. 1.3592%
D. 0.9709%
E. 0.8721%
F. 1.2621%
G. 1.1650%
H. 2.0468%
6 points

Question 16
1.

Leveraged Corporation has a total debt to assets ratio of 85 percent. Its net income last
year was \$20,000. If the total debt was \$160,000, what was the return on equity?
A. 70.8%
B. 29.2%
C. 50.0%
D. 23.2%
E. 37.5%
F. 12.5%

G. 15.3%
H. 18.8%
6 points

Question 17
1.

Riverhawk Sports has return on equity of 19 percent, profit margin of 12.5 percent, sales
to assets ratio of 1.18. What is the companys debt to equity ratio?
A. 24.2%
B. 29.2%
C. 11.4%
D. 15.4%
E. 34.6%
F. 46.8%
G. 40.4%
H. 19.6%
6 points

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