117.

The financial goal of a corporation is to:

• maximize managers' benefits
• non of above
• maximize profits
• maximize sales
√ maximize the value of the firm for the shareholders

126. You are considering investing in a retirement fund that requires you to deposit $5,000 per
year, and you want to know how much the
fund will be worth when you retire. What financial technique should you use to calculate this
value?
• non of above
• Present value of a perpetuity
√ Future value of an annuity
• Present value of an annuity
• Future value of a single payment

127. If the present value annuity factor at 8 percent for 10 years is 6.71, what is the equivalent
future value annuity factor?
• non of above
• 5.384
√ 14.486
• 2.159
• 3.108

128. If the present value of $1 received n years from today at an interest rate of r is 0.3855, then
what is the future value of $1 invested today
at an interest rate of r percent for n years?
• non of above
• 1.701
• 1.385
√ 2.594
• Not enough information is given to solve the problem.

129. John House has taken a 20-year, $250,000 mortgage on his house at an interest rate of 6
percent per year. What is the remaining balance
(or value) of the mortgage after the payment of the fifth annual installment?
• 128958.41
• non of above
• 248719.21
√ 211689.53
• 141019.50

130. After retirement, you expect to live for 25 years. You would like to have $75,000 income
each year. How much should you have saved
in your retirement account to receive this income, if the annual interest rate is 9 percent per year?
(Assume that the payments start on the
day of your retirement.)
• 1427831.93
• non of above
• 736693.47
• 2043750.21
√ 802995.88

131. If the one-year discount factor is 0.90, what is the present value of $120 expected one year
from today?
• 100
√ 108
• 133
• non of above
• 96

132. If the present value of $480 to be paid at the end of one year is $400, what is the one-year
discount factor?
• non of above
•1
√ 0.833
• 0.20
• 1.20

133. If the one-year discount factor is 0.8333, what is the discount rate (interest rate) per year?
• 10 percent
• non of above
• 40 percent
√ 20 percent
• 30 percent

134. The present value of $100,000 expected at the end of one year, at a discount rate of 25
percent per year, is:
• 75000
• 125000
• 100000
√ 80000
• non of above

135. The one-year discount factor, at a discount rate of 25 percent per year, is:
• 0.75.
• non of above
• 1.25.
• 1.0.
√ 0.8.

136. The present value of $121,000 expected one year from today at an interest rate (discount
rate) of 10 percent per year is:
• 108900
• non of above
• 121000
• 100000
√ 110000

137. If the present value of cash flow X is $240, and the present value of cash flow Y is $160,
then the present value of the combined cash
flows is:
• 240
• non of above
• 80
√ 400
• 160

138. If the annual interest rate is 12 percent, what is the two-year discount factor?
• non of above
• 0.893
• 1.254
√ 0.797
• 0.806

139. Present value is defined as:

• future cash flows multiplied by the factor (1 + r)t.
• non of above
• inverse of future cash flows
• present cash flows compounded into the future
√ future cash flows discounted to the present by an appropriate discount rate

140. The present value of $100 expected two years from today at a discount rate of 6 percent is
• $100.00.
• non of above
• $112.36.
• $106.00.
√ $89.00

141.Northern Gas recently paid a $2.80 annual dividend on its common stock. This dividend
increases at an average rate of 3.8 percent per year. The stock is currently selling for $26.91 a
share. What is the market rate of return?
R = D0(1+g)/ P0 + G

R= [2.80(1+.038)/ 26.91] + .038

R= 14.6%

142. Callander Enterprises stock is listed on NASDAQ. The firm is planning to issue some new equity
shares for sale to the general public. This sale will occur in which one of the following markets?

A. private

B. auction

C. exchange floor

D. secondary

E. primary

145. Which one of the following actions by a financial manager creates an agency problem?
A. refusing to borrow money when doing so will create losses for the firm
B. refusing to lower selling prices if doing so will reduce the net profits
C.agreeing to expand the company at the expense of stockholders' value
D. agreeing to pay bonuses based on the market value of the company stock
E. increasing current costs in order to increase the market value of the stockholders' equity

146. The management of the firm's short-term assets and liabilities is called:
*working capital management

147. The process of planning and managing a firm's long-term investments is called:
*capital budgeting

148. The mixture of debt and equity used by the firm to finance its operations is called:
*capital structure

149. If the future value of $1 invested today at an interest rate of r percent for n years is 9.6463,
what is the present value of $1 to be received
in n years at r percent interest rate?
• non of above
• 9.646
•1
√ 0.104
• 0.413

150. If the present value of $1 received n years from today at an interest rate of r is 0.621, then
what is the future value of $1 invested today
at an interest rate of r% for n years?
• 1.621
• non of above
• Not enough information is given to solve the problem
√ 1.61
•1

151. John House has taken a $250,000 mortgage on his house at an interest rate of 6 percent per
year. If the mortgage calls for 20 equal,
annual payments, what is the amount of each payment?
√ 21796.14
• 10500
• non of above
• 24327.18
• 16882.43
152. For $10,000, you can purchase a five-year annuity that will pay $2,358.65 per year for five
years. The payments occur at the beginning
of each year. Calculate the effective annual interest rate implied by this arrangement.
• 11 percent
• 10 percent
• 8 percent
√ 9 percent
• non of above
153. If the present value annuity factor is 3.8896, what is the present value annuity factor for an
equivalent annuity due if the interest rate is 9
percent?
• 5.313
• non of above
• 3.89
• 3.568
√ 4.24

154. If the present value annuity factor for 10 years at 10 percent interest rate is 6.1446, what is
the present value annuity factor for an
equivalent annuity due?
• 5.732
• 6.145
• 7.38
√ 6.759
• non of above

155. What is the eight-year present value annuity factor at a discount rate of 11 percent?
• 5.712
• non of above
• 6.916
√ 5.146
• 11.859

156. If the three-year present value annuity factor is 2.673 and the two-year present value
annuity factor is 1.833, what is the present value of
$1 received at the end of the three years?
• 0.92
• non of above
• 1.19
• 0.89
√ 0.84