## [answered] 1. Bank A pays 8.5 percent compounded monthly on all deposi

1. Bank A pays 8.5 percent compounded monthly on all deposits. What is the

effective rate?

A 8.192

. %

B 8.839

. %

C 8.973

. %

D 8.436

. %

E. 8.322 % F. 8.031 % G 8.668

. %

H 9.089

. % 6 points QUESTION 2

1.

The Bank of Loans uses the following rating scheme to classify the riskiness of

its customers. Risk Class

Prime

Speculative: Non-investment

Speculative: Highly

Substantial risks

(%)

.05

1.0

1.5

2.0

4.0

6.0

9.0

12.0 2.

The bank?s pure rate of interest is 4.0% and the inflation premium is

3%. What rate would the bank offer a customer who is in the lower medium

A 10.31

. %

B 8.21

. %

C 8.74

. %

D 9.79

. %

E. 9.26 % F. 7.69 % G 6.64

. %

H 7.16

. % 6 points QUESTION 3

1.

You just won the lottery! You wish to put away enough money so that you can

withdraw \$7,500 per month for 22 years. You can earn 10.5% rate on any funds you

deposit. How much will you have to deposit now to meet your goal? (Note:

Withdrawal frequency matches compounding frequency.)

A \$536,7

. 73

B \$653,1

. 43

C \$594,5

. 51

D \$712,1

. 79

E. \$771,2 03 F. \$829,6 59 G \$480,1

. 00

H \$886,8

. 90 6 points QUESTION 4

1.

Upon graduation from college in two years you plan to go for an extravagant

the cost of the vacation. You have \$2,000 available at present, which you plan to

deposit into an account that pays 11.75 percent interest compounded daily. What is

the maximum amount you will be able to spend on your vacation?

A \$5,8

. 85

B \$5,4

. 37

C \$6,2

. 30

D \$6,1

. 09

E. \$6,0 04

F. \$5,5 53

G \$5,7

. 77

H \$5,6

. 61 6 points QUESTION 5

1.

Cash Coverage, Inc. had net sales of \$700,000 last year, and increased its

retained earnings by \$75,000 for the year after paying a dividend of \$2 per share on

37,500 outstanding shares. The tax rate for the company is 40%. The company had

cost of goods sold of \$275,000 and its accumulated depreciation increased by

\$125,000. What is its cash coverage ratio?

A 5.4

. 5

B 3.7

. 1

C 4.6

. 7

D 8.5

. 0

E. 2.5 0

F. 6.0 0

G 3.0

. 0

H 4.3

. 1 6 points QUESTION 6

1.

You purchased a new car for \$35,000 by making a \$10,000 down payment and

borrowing the remainder at an annual rate of 9.25 percent for five years. What is

A \$40

. 6

B \$57

. 0

C \$52

. 2

D \$42

. 8

E. \$45 1 F. \$49 8 G \$54

. 6

H \$47

. 5 6 points QUESTION 7

1.

Fast Street Investment Company offers you an investment that promises to

triple your money in 57 months. Interest is compounded quarterly. What rate per

quarter is the investment promising?

A 13.0

. %

B 6.0%

.

C 6.7%

.

D 10.5

. %

E. 17.0 % F. 5.4%

G 7.6%

.

H 8.8%

. 6 points QUESTION 8

1.

UML Inc. had an EBIT of 67,000, depreciation expense of 8,500, and paid

18,000 in taxes. Its interest costs were \$9,200; its long-term borrowing reduced by

\$4,000; it raised \$6,000 in new equity; and paid \$12,000 in dividends. If the net

capital spending was \$28,000, what was the change in net working capital?

A 10,3

. 00

B 10,6

. 00

C 10,0

. 00

D 11,5

. 00

E. 11,2 00 F. 9,70 0 G 9,40

. 0

H 10,9

. 00 6 points QUESTION 9

1.

ICC, Inc. (ICC) had sales of \$300,000 on which it earned net income of

\$24,000. Its total debt is \$54,000 and total equity is \$78,000. Last year, ICC paid

dividends of \$6,000. If the total debt ratio remains constant and the company grows

at the sustainable growth rate in the coming year, how much new borrowing will take

place?

A \$9,88

. 2

B \$27,7

. 20

C \$16,2

. 00

D \$7,50

. 0

E. \$20,3 57

F. \$12,7 50

G \$30,2

. 50

H \$25,3

. 85 6 points QUESTION 10

1.

Lowell Growth, Inc. has total debt ratio of 0.48 and a dividend payout ratio of

40 percent. If its profit margin is 7 percent and total asset turnover is 2.5, what is its

return on assets ratio (ROA)?

A 40.0

. % B 20.6

. %

C 17.5

. %

D 35.6

. %

E. 27.6 % F. 24.0 % G 14.6

. %

H 31.5

. % 6 points QUESTION 11

1.

Breads ?R Us had sales of \$60,000 last year. Their total costs were \$22,000,

and the depreciation charge was \$3,000. They have 1,680 shares outstanding and

paid dividend of \$3.20 per share after keeping 70 percent of the net income as

retained earnings. If they paid 40 percent in taxes, how much was the interest

expense?

A 1,91

. 1

B 1,00

. 0

C 5,13

. 3

D 5,51

. 1

E. 4,66 7

F. 3,46 7

G 4,11

. 1

H 2,73 . 3 6 points QUESTION 12

1.

Note: This is a challenging question. Please attempt it in the end.

Ms. Ieda Silva plans to retire in 35 years and expects to live for 20 years

after retirement. She is preparing a savings plan to meet the following objectives.

First, after retirement she would like to be able to withdraw \$20,000 per month. The

first withdrawal will occur at the end of the first month after retirement. Second, she

would like to leave her son an inheritance of \$1,000,000 when she passes on. Finally,

she would like to set up a fund that will pay \$5,000 per month forever to her favorite

charity after she passes on. These payments to the charity will start one month after

she passes on. All monies can earn 10 percent annual rate compounded monthly.

How much will she have to save per month to meet these objectives? She wishes to

make the first deposit a month from now and the last deposit on the day she retires.

A \$1,105.

. 11

B \$983.2

. 4

C \$1,014.

. 02

D \$430.7

. 1

E. \$603.3 8 F. \$1,550. 51 G \$1,202.

. 17

H \$1,306.

. 52 6 points QUESTION 13

1.

You are 20 years old and plan to retire with \$1,000,000. You have \$37,500

available for investment now. You deposit this into an account that pays 10.75%

interest compounded annually? How old will you be when the account has the target

A 6

. 1

B 6

. 5

C 5

. 4

D5

. 5

E. 5 2

F. 6 3

G5

. 9

H5

. 7 6 points QUESTION 14

1.

Riverhawk Sales, Inc. had a net income of \$15,000 on sales of \$100,000 last

year. Its balance sheet shows debt of \$20,000 and equity of \$60,000. If the total

dividend paid was \$5,000, what is its sustainable growth rate?

A 0.14

. 78

B 0.13

. 33

C 0.20

. 00

D 0.12

. 00

E. 0.16 36 F. 0.09 63 G 0.10

. 77

H 0.18

. 10 6 points QUESTION 15

1.

You opened an account with an investment of \$4,000. The value of the

account tripled in 18 years. If interest was compounded quarterly, what rate per

quarter did you earn on the account?

A 1.4545

. %

B 1.6640

. %

C 1.5376

. %

D 1.8479

. %

E. 1.3165 % F. 2.3374 % G 1.9441

. %

H 1.1510

. % 6 points QUESTION 16

1.

The risk premium for an investment is 3 percent. The inflation premium is 4

percent. If the pure rate of interest in the market is 4.5 percent, what should be the

yield on a risk-free security? Use exact formulation.

A 7.12

. %

B 8.16

. %

C 9.20

. %

D 6.60

. %

E. 7.64 % F. 8.68 % G 6.08

. %

H 9.72

. % 6 points QUESTION 17

1.

Quick Corporation has current liabilities of \$7,200, inventory of \$2,900, and

net working capital of \$3,000. What is its quick ratio?

A 0.96

. 30

B 0.90

. 48

C 0.93

. 75

D 1.02

. 56

E. 1.00 00 F. 1.03 57 G 1.01

. 39

H 0.98

. 33

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