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Money markets are markets

Categories: General Questions
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1. Money markets are markets for (Points : 5)
Foreign stocks.
Consumer automobile loans.
U.S. stocks.
Short-term debt securities.

2. The primary operating goal of a publicly-owned firm interested in serving its stockholders should be to (Points : 5)
Maximize the stock price per share over the long run, which is the stock?s intrinsic value.
Maximize the firm’s expected EPS.
Minimize the chances of losses.
Maximize the firm’s expected total income.

3. Which of the following statements is CORRECT? (Points : 5)
Sole proprietorships and partnerships generally have a tax advantage over many
corporations, especially large ones.
Sole proprietorships are subject to more regulations than corporations.
In any type of partnership, every partner has the same rights, privileges, and liability
exposure as every other partner.
Corporations of all types are subject to the corporate income tax.

4. Which of the following could explain why a business might choose to operate as a corporation rather than as a sole proprietorship or a partnership? (Points : 5)
Corporations generally find it relatively difficult to raise large amounts of capital.
Less of a corporation’s income is generally subjected to taxes than would be true if the firm were a partnership.
Corporate shareholders escape liability for the firm’s debts, but this factor may be offset by the tax disadvantages of the corporate form of organization.
Corporate investors are exposed to unlimited liability.

5. Which of the following statements is CORRECT? (Points : 5)
If Disney issues additional shares of common stock through an investment banker, this would be a secondary market transaction.
If you purchased 100 shares of Disney stock from your brother-in-law, this would be an example of a primary market transaction.
The IPO market is a subset of the secondary market.
As they are generally defined, money market transactions involve debt securities with maturities of less than one year.

6. Ellen now has $125. How much would she have after 8 years if she leaves it invested at 8.5% with annual compounding?
(Points : 7)
$205.83
$216.67
$228.07
$240.08
$252.08

7. How much would $5,000 due in 25 years be worth today if the discount rate were 5.5%? (Points : 8)
$1,067.95
$1,124.16
$1,183.33
$1,245.61
$1,311.17

8. Which of the following statements is CORRECT? (Points : 5)
The cash flows for an ordinary (or deferred) annuity all occur at the beginning of the periods.
If a series of unequal cash flows occurs at regular intervals, such as once a year, then the series is by definition an annuity.
The cash flows for an annuity due must all occur at the ends of the periods.
The cash flows for an annuity must all be equal, and they must occur at regular intervals, such as once a year or once a month.

9. Your bank account pays a 6% nominal rate of interest. The interest is compounded quarterly. Which of the following statements is CORRECT? (Points : 5)
The periodic rate of interest is 1.5% and the effective rate of interest is 3%.
The periodic rate of interest is 6% and the effective rate of interest is greater than 6%.
The periodic rate of interest is 1.5% and the effective rate of interest is greater than 6%.
The periodic rate of interest is 3% and the effective rate of interest is 6%.
The periodic rate of interest is 6% and the effective rate of interest is also 6%.

10. A $150,000 loan is to be amortized over 7 years, with annual end-of-year payments. Which of these statements is CORRECT? (Points : 5)
The annual payments would be larger if the interest rate were lower.
If the loan were amortized over 10 years rather than 7 years, and if the interest rate were the same in either case, the first payment would include more dollars of interest under the 7-year amortization plan.
The proportion of each payment that represents interest as opposed to repayment of principal would be higher if the interest rate were lower.
The proportion of each payment that represents interest versus repayment of principal would be higher if the interest rate were higher.
The proportion of interest versus principal repayment would be the same for each of the 7 payments.

11. Which of the following items is NOT included in current assets? (Points : 5)
Accounts receivable.
Inventory.
Bonds.
Cash.

12. Which of the following items cannot be found on a firm’s balance sheet under current liabilities? (Points : 5)
Accounts payable.
Short-term notes payable to the bank.
Accrued wages.
Cost of goods sold.

13. Other things held constant, which of the following actions would increase the amount of cash on a company’s balance sheet? (Points : 5)
The company repurchases common stock.
The company pays a dividend.
The company issues new common stock.
The company gives customers more time to pay their bills.

The time value of money is the foundation of for all of finance. Each transaction has a cost associated with it. Take a look at today’s interest rates

Choose an apparel company. Imagine the company is planning on building another facility to make garments. This company will need to spend at least $1,000,000.00 to build the plant. The company has decided to take a loan to pay for the plant. The company has the choice of starting construction today or in six months. Looking at today’s interest rates, should the company begin construction today or in six months? Also, explain your answer to each of the following questions:

Discuss whether these rates are attractive or not. Do you think these rates are expensive?
? Do you think these rates are cheap?
? How is the time value of money important to the company?
? If the company chooses to wait six-months, what does that say about the company’s view on the time value of money?

As a future health care professional, in your opinion, what is the role of the Federal Trade Commission (FTC) in healthcare administration? Discuss any antitrust activities that the FTC has faced in the last five (5) years.

What are some current trends in retailing? How have changing demographics, such as the aging population and changes in family structure, affected retail trends? What future trends might you predict based on emerging demographics such as retiring baby boomers?

1. The time value of money concept rests on which of the following principles?

a. a dollar today is worth more than a dollar in the future

b. A dollar in the future is worth more than a dollar today

c. a dollar is always worth the same amount

d. time is money

e. a dollar should be spent immediately to get the most value

2. In a rare moment of generosity, you give your nephew $100 on his first birthday. Your nephew’s mother, however, knows the time value of money, so she invests the money in a 20-year 7% CD. (At maturity the CD pays back the principal plus accumulated interest at 7% a year.) If your nephew cashes in the CD at maturity, how much will he receive?

a. $107

b. $358

c. $387

d. $2,140

3. In November 1998 you bought 100 shares of Microsoft stock for $35.375 a share. In November 2000, hearing about an unfavorable ruling against Microsoft by a Federal judge, you sold your stock for $92.5625 a share. What was your average annual rate of return on your Microsoft investment? (disregard dividends and commissions)

a. 262%

b. 62%

c. 585%

d. 1.6%