Question Details

FIN 571 Week 1 Connect Problems

 1. 
 
A business created as a distinct legal entity is called a:


 2.
 
One disadvantage of the corporate form of business ownership is the:


 3. 
 
The Sarbanes-Oxley Act requires public corporations to:

 4. 
 
Which one of these best fits the description of an agency cost?


5. 
 
The primary goal of financial management is to:

 6. 
 
Which one of the following business types is best suited to raising large amounts of capital?


	
 7. 
 
Accounting profits and cash flows are generally:


 8. 
 
You just paid $328,000 for an annuity that will pay you and your heirs $11,800 a year forever. What rate of return are you earning on this policy?


 
 9. 
 
What is the future value of $1,060 a year for 5 years at a 6 percent interest?


 
10. 
 
Your credit card company charges you 2.00 percent per month. What is the annual percentage rate on your account?


 11.
  
First City Bank pays 6 percent simple interest on its savings account balances, whereas Second City Bank pays 6 percent interest compounded annually.
  
If you made a $72,000 deposit in each bank, how much more money would you earn from your Second City Bank account at the end of 10 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
  
  Difference in accounts	$   


 

12.
 
a.	Compute the future value of $2,000 compounded annually for 10 years at 8 percent. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
  
  Future value	$   

  
b.	Compute the future value of $2,000 compounded annually for 10 years at 11 percent. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
 
  Future value	$   

 
c.	Compute the future value of $2,000 compounded annually for 15 years at 8 percent. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
 
  Future value	$   



13. 
For each of the following, compute the present value (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.):
  
Present Value	Years	 	Interest Rate	Future value
$        
14    	 	8	%	 	$	14,851	 
       
5    	 	14	 	 	 	45,557	 
       
30    	 	15	 	 	 	880,073	 
       
35    	 	8	 	 	 	544,164	 
________________________________________

  	  

 14.
 
Wilkinson Co. has identified an investment project with the following cash flows:
    
Year	 	Cash Flow
 	1	 	 	$	860	 
 	2	 	 	 	1,210	 
 	3	 	 	 	1,470	 
 	4	 	 	 	1,625	 
________________________________________
  
If the discount rate is 11 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
  
  Present value	$   

 
If the discount rate is 16 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
  
  Present value	$   

  
If the discount rate is 30 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
  
  Present value	$   


 15. 
 
Four months ago, you purchased 1,300 shares of Lakeside Bank stock for $16.96 a share. You have received dividend payments equal to $.58 a share. Today, you sold all of your shares for $17.96 a share. What is your total dollar return on this investment?


16.
Suppose a stock had an initial price of $60 per share, paid a dividend of $.60 per share during the year, and had an ending share price of $72.
 
Compute the percentage total return. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
 
  Total return	  %  


 17.
You’ve observed the following returns on SkyNet Data Corporation- stock over the past five years: 10 percent, -11 percent, 18 percent, 19 percent, and 10 percent. Suppose the average inflation rate over this period was 2.2 percent, and the average T-bill rate over the period was 4.7 percent.
 
a.	What was the average real return on the stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
 
  Average real return	  %  

 
b.	What was the average nominal risk premium on the stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.)
 
  Average nominal risk premium	  %