/  156
 
Time Value Of Money
1.
 
Using simple interest gets you more interest than in the case of using compoundinterest. (True/ 
False
)2.
 
Shirley is saving at the rate of $1000 per month for a period of 15 years for herretirement. The interest on the deposit is 10%. How much will she receive onmaturity of her deposit?3.
 
Robert wants to save $5,00,000 in 30 years by making a monthly investment at aninterest rate of 10%. What is his monthly investment?a. 143 b.1300 c. 575 d. 9444.
 
A bank offers an annual interest rate of 13 %. The interest is calculated everymonth. What is the effective interest rate?
(13.8)
 5.
 
You plan to buy a car costing $50000 and approach a finance company who offersyou a loan on the condition you make a down payment of 20% and the balancewill be advanced @ 9%, reducing balance interest, over a period of 48 months.What will the equate monthly interest be?
($ 1028.90)
 6. Time value of money is based only on principal and interest rate. True/ 
False
.
Securities
1.
 
Suppose you paid $1,000 for a 30-year bond that yielded 7 percent interest. Ayear later, the rate for a comparable new bond falls to 5 percent. What is the newprice of your bond?
($ 1400)
 2.
 
Suppose you paid $1,000 for a 30-year bond that yielded 7 percent interest. Ayear later, the rate for a comparable new bond rises to 9 percent. What is the newprice of your bond?
($ 777.78)
 3.
 
In the above question, what is your bond worth at maturity?
($ 1000
)4.
 
Treasury bills have the _____________ maturity periods. (
shortest
, intermediate,longest).5.
 
In case of zero-coupon bonds, you must pay taxes each year on the __________that you earn.
(“phantom interest”)
 6.
 
If a person buys zero-coupon bonds of face-value $ 1000 with maturity period of 9 years at $865, then what is the rate of interest?
 
 Mutual Funds
1.
 
The NAV is the figure you look at in the newspaper to see how much your mutualfund investment rose or fell the previous day. (
True
 /False)2.
 
There are about ______ mutual funds presently in the US . (70,700,
7000
,70000)3.
 
Expand RAROR. (
Risk Adjusted Rate Of Return
)4.
 
Mutual fund shares are not federally insured or backed by the U.S. government.(
True
 /False).5.
 
Correct the following sentence, if required.It’s usually wise to invest in similar kinds of funds, owning three or four withdifferent investment goals probably is enough to achieve sufficient diversification.(
replace ‘similar’ with ‘different’
)6. While investing in a mutual fund, you will look at the following two factorsa.
 
past performance & risk (correct answer)b.
 
past performance & price
Financial Systems
1. _____________ and _____________ are the two important agencies, responsible forregulating the money and capital markets. (
Federal Reserve, Securities ExchangeCommission
).2. Are the stock markets a primary market or a secondary market for securities?(
Secondary Market
).3. A bank acceptance can, in formal terms, can be described as an unconditional order inwriting
•
 
addressed and signed by a drawer (the lender)
•
 
to a bank which signs the document and becomes the acceptor (the acceptance)
•
 
promising to pay a certain amount of money at a fixed date in the future
•
 
to the bearer or holder (the borrower) of the document.Which of the above bullets, if any, is (are) wrong?4. A BA (bank acceptance) is issued at 12%. The nominal amount of the BA is $ 1Million and it is issued for 90 days. Compute the discount on this BA
 
(
discount= 1000000 * 90/365 * 0.12 = $ 29589
)5. The major function of Federal Reserve is ensuring enough currency and coin in theeconomy . (True/False)6. ___________are firms which help business, government and other entities raisefinance by issuing securities. Young firms with limited capital and managerial expertiserequire resources and advice in running their business, which are provided by _________.( 1
st
blank 
-Merchant banks,
2
nd
blank 
- venture capitalists)
 
Money And Banking
1.
 
In short, define liquidity. Give an example.2.
 
Which of the following is the most liquid?a. M1b. M2c. M3d. L3.
 
Give three assets and three liabilities that figure on a bank’s balance sheet.(
Assets -
Cash/Reserves, Loans, Securities
Liabilities -
Deposits, Borrowings, Capital)4.
 
Which of the following will NOT affect a bank’s profits?a. Liquidityb. Talent attritionc. Credit risk d. Interest ratese. Assetsf. Capital adequacy5.
 
In case of commercial banks, it is possible that assets may be greater or less thanliabilities . (True/ False). Is the same true in case of World Bank?6.
 
In the US, for which of the following services offered by a bank does a customerhave to pay?a. Maintaining an accountb. Writing a check c. Using the ATMd. Opening a deposit

Finance

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Debra_Fleming_1455left a comment

6. Dewyco has perferred stock trading at $50 per share. The next perferred dividend of $4 is due in one year.What is Dewyco cost of capital for perferred stock?
02 / 28 / 2010
Reply

Debra_Fleming_1455 replied:

Can you help me with this problem,Dewyco has perferred stock trading at $50 per share. The next perferred dividend of $4 is due in one year.What is Dewyco cost of capital for perferred stock?
02 / 28 / 2010

Debra_Fleming_1455left a comment

Laurel Inc. has debt outstanding with a coupon rate of 6% and a yeild of maturity of 7%. Its tax rate is 35% . What is Laurel's effective (after tax) cost of debt?
02 / 28 / 2010
Reply

Debra_Fleming_1455 replied:

Can you help me with this problem?Laurel Inc. has debt outstanding with a coupon rate of 6% and a yeild of maturity of 7%. Its tax rate is 35% . What is Laurel's effective (after tax) cost of debt?
02 / 28 / 2010