Financial_E1

The nominal rate of return on a risky security is 8.37 percent, and the rate of return on risk-free securities is 4.1 percent. What is the inflation rate if the pure rate is 3.2 percent?


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6 points  

The nominal rate of return on a risky security is 8 percent, and the same time the rate of return on a security with no risk is 4.3 percent. What is the risk premium?


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6 points  

You plan to retire with $750,000 in 20 years. How much should you deposit each month into an account that pays 10.0% annual rate compounded monthly? (Note: Compounding frequency is the same as the deposit frequency.)


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6 points  

Sungsam Company has total assets of $200,000 and total debt of $60,000. If it has 40,000 shares outstanding, what is the book value per share?


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6 points  

Student House of Pizza had net sales of $300,000 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 $0.50 per share. If the company’s tax rate is 30 percent, what was the depreciation charge?



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6 points  

The Hoola Hoop Company has current assets of $200,000. If the current ratio is 2.0 and the quick ratio is 1.25, what is the value of inventory?


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6 points  

(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 20 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 ten years, and then increase the monthly amount to $8,000 per month for the remaining ten 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 10 percent compounded monthly. Assume all cash flows occur at the end of the month.


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6 points  

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?


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6 points  

You purchased a house for $425,000 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?


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6 points  

Leveraged Corporation has a total debt to assets ratio of 55 percent. Its net income last year was $20,000. If the total debt was $160,000, what was the return on equity?


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6 points  

XYZ Corporation has a dividend payout ratio of 25 percent and a sustainable growth rate of 12 percent. What is the company’s return on equity (ROE)?


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6 points  

Last year, Parking Corporation had net sales of $2,900,000 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.


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6 points  

How long will it take for $1,000 to grow to $3,750 at a rate of 22 percent compounded quarterly?


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6 points  

You are planning to retire in 15 years with $750,000. You can earn 8.0% compounded quarterly. How much do you need to invest today?


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6 points  

XYZ Sports has return on equity of 19 percent, profit margin of 12 percent, sales to assets ratio of 1.18. What is the company’s debt to equity ratio?


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6 points  

What is the total future value of the following set of cash flows at 8% rate?

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6 points  

You just won the lottery! You wish to put enough money away so that you can withdraw $6,000 per month for 35 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.)


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