Fin Test Bank

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MBA 8622: Practice Final Exam (Fall 1999) 1. According to the textbook, what should be the main objective of the management of a firm? a. Maximize net income b. Minimize risk c. Maximize customer satisfaction d. Build a strong team of well-trained, motivated employees e. Maximize shareholder’s wealth 2. Which of the following statements is most correct? a. The present value of an annuity due will exceed the present value of an ordinary annuity (assuming all else equal). b. The future value of an annuity due will exceed the future value of an ordinary annuity (assuming all else equal). c. The nominal interest rate will always be greater than or equal to the effective annual interest rate. d. Statements a and b are correct. e. All of the statements above are correct. 3. Frank Lewis has a conventional, 30-year, fixed-rate, $100,000 mortgage with a nominal interest rate of 10 percent and monthly compounding. Which of the following statements regarding his mortgage is most correct? a. The monthly payments will decline over time. b. The proportion of the monthly payment which represents interest will be lower for the last payment than for the first payment on the loan. c. The total dollar amount of principal being paid off each month gets larger as the loan approaches maturity. d. Statements a and c are correct. e. Statements b and c are correct. 4. Your uncle has agreed to deposit $3,000 in your brokerage account at the beginning of each of the next five years (t = 1, t = 2, t = 3, t = 4 and t = 5). You estimate that you can earn 9 percent a year on your investments. How much will you have in your account immediately after your uncle makes his last deposit (at the beginning of year 5)? (Hint: This is more complex than it seems and you should draw

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