Fin370 Essay

399 Words2 Pages
11) A zero-coupon bond A. pays no interest B. pays interest at a rate less than the market rate C. is a junk bond D. is sold at a deep discount at less than the par value 12) If you have $20,000 in an account earning 8% annually, what constant amount could you withdraw each year and have nothing remaining at the end of 5 years? A. $3,525.62 B. $5,008.76 C. $3,408.88 D. $2,465.78 13) At what rate must $400 be compounded annually for it to grow to $716.40 in 10 years? A. 6% B. 5% C. 7% D. 8% 14) The present value of a single future sum A. increases as the number of discount periods increase B. is generally larger than the future sum C. depends upon the number of discount periods D. increases as the discount rate increases 15) Which of the following is considered to be a spontaneous source of financing? A. Operating leases B. Accounts receivable C. Inventory D. Accounts payable 16) Compute the payback period for a project with the following cash flows, if the company’s discount rate is 12%. Initial outlay = $450 Cash flows: Year 1 = $325 Year 2 = $65 Year 3 = $100 A. 3.43 years B. 3.17 years C. 2.88 years D. 2.6 years 17) For the NPV criteria, a project is acceptable if the NPV is __________, while for the profitability index, a project is acceptable if the profitability index is __________. A. less than zero, greater than the required return B. greater than zero, greater than one C. greater than one, greater than zero D. greater than zero, less than one 18) Which of the following is considered to be a deficiency of the IRR? A. It fails to properly rank capital projects. B. It could produce more than one rate of return. C. It fails to utilize the time value of money. D. It is not useful in accounting for risk in capital budgeting.

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