Midterm Exam Critical Analysis
NAME: _______________________________ BSAD 180: Managerial Finance Midterm Exam I. Multiple Choices (40%) ( b)1. The primary ambition of banking administration is to: a. aerate accepted assets per allotment of the absolute stock. b. aerate the accepted bulk per allotment of the absolute stock. c. abstain banking distress. d. abbreviate operational costs and aerate close efficiency. e. advance abiding advance in both sales and net earnings. ( c ) 2. The absorption bulk bidding as if it were circuitous already per year is alleged the _____ rate. a. declared absorption b. ompound absorption c. able anniversary d. alternate absorption e. circadian absorption ( b )3. You are comparing two advance options. The bulk to advance in either advantage is the aforementioned today. Both options will accommodate you with $20,000 of income. Advantage A pays bristles anniversary payments starting with $8,000 the aboriginal year followed by four anniversary payments of $3,000 each. Advantage B pays bristles anniversary payments of $4,000 each. Which one of the afterward statements is actual accustomed these two advance options? a. Both options are of according bulk accustomed that they both accommodate $20,000 of income. . Advantage A is the bigger best of the two accustomed any absolute bulk of return. c. Advantage B has a academy present bulk than advantage A accustomed a absolute bulk of return. d. Advantage B has a lower approaching bulk at year 5 than advantage A accustomed a aught bulk of return. e. Advantage A is bigger because it is an accomplishment due. ( d )4. Your parents are giving you $100 a ages for four years while you are in college. At a 6% abatement rate, what are these payments anniversary to you back you aboriginal alpha college? a. $3,797. 40 b. $4,167. 09 c. $4,198. 79 d. $4,258. 03 e. 4,279. 32 ( c )5. The time bulk of money abstraction can be authentic as: a. the accord amid the accumulation and appeal of money. b. the accord amid money spent against money received. c. the accord amid a dollar to be accustomed in the approaching and a dollar today. d. the accord of absorption bulk declared and bulk paid. e. None of the above. ( b)6. Marko, Inc. is because the acquirement of ABC Co. Marko believes that ABC Co. can accomplish banknote flows of $5,000, $9,000, and $15,000 over the abutting three years, respectively.
After that time, Marko feels ABC will be worthless. Marko has bent that a 14% bulk of acknowledgment is applicative to this abeyant purchase. What is Marko accommodating to pay today to buy ABC Co.? a. $19,201. 76 b. $21,435. 74 c. $23,457. 96 d. $27,808. 17 e. $31,758. 00 ( b)7. What is the able anniversary bulk if a coffer accuse you 7. 64% circuitous quarterly? a. 7. 79% b. 7. 86% c. 7. 95% d. 7. 98% e. 8. 01% ( a)8. A General Co. band has an 8% advertisement and pays absorption annually. The face bulk is $1,000 and the accepted bazaar amount is $1,020. 0. The band matures in 20 years. What is the crop to maturity? a. 7. 79% b. 7. 82% c. 8. 00% d. 8. 04% e. 8. 12% ( a)9. Wine and Roses, Inc. offers a 7% advertisement band with semiannual payments and a crop to ability of 7. 73%. The bonds complete in 9 years. What is the bazaar amount of a $1,000 face bulk bond? a. $953. 28 b. $963. 88 c. $1,108. 16 d. $1,401. 26 e. $1,401. 86 ( a)10. What is the net present bulk of a activity that has an antecedent banknote address of $12,670 and the afterward banknote inflows? The appropriate acknowledgment is 11. 5%.
YearCash Inflows 1 $4,375 2 $ 0 3 $8,750 4 $4,100 a. $218. 68 b. $370. 16 c. $768. 20 d. $1,249. 65 e. $1,371. 02 II. Essays/Calculations (60%) 1. You are planning to save for retirement over the abutting 30 years. To do this, you will advance $1,000 a ages in a banal alternate armamentarium account. The acknowledgment of the anniversary is accepted to be 1% per month. Back you retire, you will put your money into a safer anniversary that will acquire 0. 5% per month. How abundant can you abjure anniversary ages from your anniversary bold a 25-year abandonment period? 2.
Miller Corp. has a exceptional band authoritative semiannual payments. The band pays an 8% coupon, has a YTM of 6%, and has 10 years to maturity. The Modigliani Corp. has a abatement band authoritative anniversary payments. The band pays a 6% coupon, has a YTM of 8%, and additionally has 10 years to maturity. If absorption ante abide unchanged, what do you apprehend the amount of these bonds to be 1 year from now? In 5 years? In 10 years? Please additionally allegorize your answers by graphing band prices against time to maturity. 3. Define the afterward terms: (a) Pure abatement loan. b) YTM. (c) Call bond. 4. You are accessible to buy a abode and you accept $20,000 for a bottomward acquittal and closing costs. Closing costs are estimated to be $5,000. The absorption bulk on the accommodation is 5. 5% per year with account compounding for a 30-year anchored bulk loan. You are able to buy the abode at $165,000. What is the account payment? Suppose that you accept an anniversary bacon of $50,000. What is the arrangement of the mortgage acquittal to your account income? 5. You accept a acclaim agenda appliance from Muwa Coffer alms an anterior bulk of 1. 9% per year, circuitous account for the aboriginal 6 months, accretion thereafter to 22. 99% circuitous monthly. Bold that you alteration the $5,000 antithesis from your absolute acclaim agenda and accomplish no consecutive payment, how abundant absorption will you owe at the end of the aboriginal year? 6. The Brennan Co. aloof paid a allotment of $1 per allotment on its stock. The assets are accepted to abound at 8% for two years. After that, the advance bulk will according 6% per year indefinitely. The bulk of disinterestedness is 12%. The YTM on 30-year T-bond is 10%. What is the fair amount of the shares today?
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