Computed of future value of a bond and preferred stock

Reference no: EM1310481

Computed of Future value of a bond and discussion on preferred stock, Beta, risk free rate, cost of debt, NPV, IRR.

1. You invest $10,000 for three years at 4% and interest is computed at the end of each year. How much money will be in your account at the end of the three years (approx)?

a. 10,400

b. 10,816

c. 11,200

d. 11,249

2. Suppose that you deposited $3,000 at the beginning of each year for three years in a savings account earning 4%. What is the account value after 3 years (approx)?

a. 9,120

b. 9,211

c. 9,739

d. 9,989

3. What is the present value of a bond that has a future value of $25,000 at the end of 3 years and earns 5% (approx)?

a. 20,200

b. 21,596

c. 23,822

d. 24,988

4. In the capital budgeting process, you would want to look at

a. Accounting balances

b. Incremental, after-tax cash flows

c. Book value

d. The balance sheet

5. A typical characteristic of a preferred stock is

a. That it has a maturity date

b. That it can be converted to a bond

c. That it pays a dividend

d. That it splits annually

6. Beta is a concept found in the

a. Capital asset pricing model

b. Slope of the yield curve

c. Valuation of bonds

d. Price/Earnings ratio

7. The risk free rate is

a. The cost of capital

b. Required rate of return

c. The rate of Treasury bills

d. Cost of equity

8. The cost of debt is typically

a. The most expensive form of capital

b. The cheapest form of capital

c. Not tax deductible for the firm

d. More expensive than cost of equity

9. Net Present Value (NPV) is used in

a. Calculating the yield curve

b. The payback method

c. The Federal Reserve Bank's short term rate calculation

d. Capital budgeting

10. The Internal Rate of Return (IRR) is

a. The present value of the cash flows

b. The risk free rate

c. Used to determine the cost of capital

A calculated rate from the cash flows of a project

Reference no: EM1310481

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