Question

For an individual with a net income of $50,000, a tax liability of $10,704.50 and a...

For an individual with a net income of $50,000, a tax liability of $10,704.50 and a 29% marginal tax rate?

____

The average tax rate is 21.41%

The average tax rate is 29.00%

The average tax rate is undetermined, but less than the marginal tax rate

The average tax rate is undetermined, but greater than the marginal tax rate

A firm had an accounts receivable balance of $150 and $170 at the beginning and the end of the week, respectively. There exists an increase in the ____ account leading to an ____ of cash.

____

Asset; inflow

Asset; outflow

Liability; inflow

Liability; outflow

Under which of the following condition will a future value calculated with simple interest exceed a future value calculated with compound interest at the same rate for the same time period?

____

The interest rate is very high

The compounding is annually

The investment period is very long

This is impossible with positive interest rates

To find the amount at the end of ten years of monthly contributions earning 12% interest compounded monthly, you need to use the financial calculator with N = ____ and I/Y = ____.

____

10; 1

120; 12

120; 1

10; 12

“Buy this new car for $25,000” or “With an appropriate down payment, pay $500 at the end of each month for 48 months at a 8% annual interest”. Assuming that the car dealer does not offer a free lunch, calculate the required down payment.

____

$8,000.00

$5,127.24

$4,161.50

$1,000.00

An individual has a line of credit of $10,000 at a rate of 8% simple interest, with interest paid at the end of each month for the withdrawal. This person has taken out $7,500 on March 22. The bank uses a 365-day year. How much interest payment will be paid on March 31?

____

$16.44

$21.92

$43.84

$50.96

What annual payment you must receive in order to earn a 7.5% rate of return on a perpetuity that has a cost of $1,250?

____

Undetermined

$93.75

$100.00

$106.25

You believe the world will end in exactly five years. You have $200,000 in a credit union earning 6% interest. You want to withdraw an equal amount at the beginning of each of the next 5 years and to have exactly $50,000 left in 5 years to blow on one big party just as the world is ending. What should be the size of your withdrawals?

____

$73.350

$162,650

$36,425

$59,375

The Dean considers Professor X to be totally incompetent thinking to firm him. Unfortunately (from the Dean’s perspective) under the terms of Professor X’s contracts, the professor cannot be dismissed for 5 years. If Professor X’s salary will be $100,000 each year (paid at the end of each year), how much will it cost the Dean to buy up the contract if the Dean believes Professor X will quit in exchange for 40% of the present value of his salary? The discount rate is 8%.

____

$159,708

$200,000

$170,895

$399,270

From investors’ point of view, which of the following investment will earn the largest amount of interest?

____

10%, compounded continuously

10%, compounded daily

10%, compounded monthly

10%, compounded annually

Which of the following is true regarding an annuity due?

____

Cash flows are equal at the end of the period

Cash flows occur at the beginning of the period

Cash flows are uneven occurring at the end of the period

Cash flows occurring at the end of the period run forever

If the nominal interest rate is 7.3% and the expected inflation rate is 4.76%, what is the precise expected real rate of return?

____

2.43%

4.76%

7.30%

12.06%

If a $1,000, 8% semi-annual bond matures, how much money will the bondholder receive as a final payment?

____

A)   $1,000

B)    $1,040

C)    $1,080

D)   Undetermined due to the unknown term of the bond

A 15-year, 8% semi-annual bond was issued four years ago with a par value of $1,000. The market rate is now 7.5% for comparable bonds. Without doing the calculation, you would expect the PV of the bond to be

____

A)   Slightly less than $1,000

B)    A lot less than $1,000

C)    Slightly more than $1,000

D)   A lot more than $1,000

Bond indentures

____

A)           Are intended to protect bondholders

B)            May restrict further borrowing by the issuing company

C)            May require the maintenance of certain financial ratio levels

D)           All of the above

Homework Answers

Answer #1

Average tax rate = Tax liability Total income

Average tax rate =  $10,704.50 $ 50,000

Average tax rate = 21.41%

___________________________________________________________________

The correct choice is Asset; inflow

Explanation: Accounts Receivable represent a sum of money owed to an entity because a service was provided or goods were transferred to another entity and instead of receiving cash , a claim was received.

___________________________________________________________________________________

The correct choice is : - This is impossible with positive interest rates

Explanation:- The force or effect of compound interest exceeds that of simple interest.

_______________________________________________________________

The correct choice is 120; 1

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