Question

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

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**

1. There’s a bond with par value of $1,000, sells for $950,
matures in 15 years, has a 8% annual coupon rate, and pays coupons
semiannually. Calculate the realized compounded holding period
annual yield assuming you held the bond for 5-years. Assume the
reinvestment rate during the five years after you bought the bond
is 10%, and the market interest rate at the time you sold the bond
was exactly 8%.
2. Assume that a callable bond was issued at...

Suppose you have a Treasury bond with a principal of $1,000. The
time to maturity is 20
years and the coupon rate is 8 percent with semi
-annual payments.
1. Calculate the price of the bond if the stated annual interest
rate (compounded annually)
is: 6 percent, 8 percent, or 10 percent.

(Bond valuation) At the beginning of the year, you bought a $1,000
per value corporate bond with an annual coupon rate of 8 percent
and a maturity date of 15 years. When you bought the bond, it had
an expected yield to maturity of 11 percent. Today the bond sells
for $920.
a. What did you pay for the bond?
b. If you sold the bond at the end of the year, what would be
your one-period return on the...

Company's long-term debt is selling for $900 per bond, with the
tax rate of 40%. These semiannual bonds have 10 years to maturity
and 8% annual coupon rate with semiannual payment frequency. How
costly is it for this company to issue new bonds? Assume par value
of 1,000.

Consider a bond that pays 6% annual coupon on a face value of
$1000 and has 5 years to maturity. Suppose you buy the bond at a
time when its yield to maturity is 10%. Assumer further that
immediately after you buy the bond, the market interest rate YTM
declines to 8%. You hold the bond for two years and sell it at the
end of the second year when YTM is still 8%.
a) Calculate the annualized two year...

Question 1
The next dividend payment by A Company will be $1.73 per share.
The dividends are anticipated to maintain a 0.06% growth rate
forever. If the stock currently sells for $16.44 per share, what is
the investors' required return rate? (Round the final answer to 4
decimal places.)
Question 2
You have an 0.066% semiannual-pay bond with a face value of
$1,000 that matures in 11 years. If the yield is 0.09%, what is the
price of this bond?...

You plan to invest $2,000 in an individual retirement
arrangement (IRA) at the end of year one that pays a stated annual
interest rate of 8 percent. How much will you have in the account
at the end of 10 years if interest is compounded monthly?
A. $4,835.93
B. $4,688.01
C. $4,237.98
D. $4,439.28

A $ 10,000 bond is purchased that pays premiums at a rate of 6% compounded semi-annually and matures in two years. He pays $ 9,600 for the instrument. Which of the following subsections is true regarding the bond?
-The corresponding cash flows will be: Period 0: $ 9,600, Period 1: $ 300, Period 2: $ 300, Period 3: $ 300, Period 4: $ 9,900 and the bond would have a rate of return of less than 10%.
-The corresponding cash...

Individual
or component costs of
capital)
Compute the cost of the following:
a. A bond that has
$1,000
par value (face value) and a contract or coupon interest rate
of
11
percent. A new issue would have a floatation cost of
6
percent of the
$1115
market value. The bonds mature in
9
years. The firm's average tax rate is 30 percent and its
marginal tax rate is
33
percent.
b. A new common stock issue that paid a
$1.60...

Investor pays $1,000 for 10-year 8% coupon bond; sells
bond 3 years later for $902.63.
Solve for i such that $1,000 (the original investment)
equals PV of 2 annual payments of $80 followed by a 3rd annual
payment of $982.63 (the actual cash flows this investor
received).
4.91%; What if the investor had paid $975 for the bond
initially

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