It is recommended that you read through each question carefully.
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| 1 | |
The annual payment on a $1,000 loan over a four-year period at 10% per year interest is $315.42. The unrecovered balance immediately after the first payment has been made is nearest to: |
| | A) | $684.58 |
| | B) | $784.58 |
| | C) | $884.58 |
| | D) | $1,100 |
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| 2 | |
If you deposit $1,000 now and are promised payments of $500 three years from now and $1,500 five years from now, the equation that will yield the correct rate of return is: |
| | A) | -1000 = 500(P/F,i,3) + 1500(P/F,i,5) |
| | B) | 0 = 1000 + 500(P/F,i,3) + 1500(P/F,i,5) |
| | C) | 1000 = -500(P/F,i,3) - 1500(P/F,i,5) |
| | D) | 0 = -1000 + 500(P/F,i,3) + 1500(P/F,i,5) |
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| 3 | |
For the net cash flow sequence of -$10,000 in year zero, +$3,000 in year one, -$2,000 in year two, +$8,000 in year three, and +$6,000 in year four, the number of possible rate of return values is: |
| | A) | 1 |
| | B) | 2 |
| | C) | 3 |
| | D) | 4 |
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| 4 | |
For the equation: 5,000 = 1,000(P/F,i,1) - 2,000(P/F,i,2) + 7,000(P/F,i,7) + 7,000(P/F,i,9), the number of possible rate of return values is: |
| | A) | 1 |
| | B) | 2 |
| | C) | 3 |
| | D) | 4 |
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| 5 | |
When there is more than one sign change in the net cash flow of a rate of return equation, the cash flow sequence is said to be: |
| | A) | simple |
| | B) | non-conventional |
| | C) | conventional |
| | D) | regular |
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| 6 | |
When there is more than one sign change in the net cash flow of a rate of return equation, the possible rate of return values will fall in the range of: |
| | A) | minus infinity to plus infinity |
| | B) | minus 100% to plus infinity |
| | C) | minus 100% to plus 100% |
| | D) | minus infinity to plus 100% |
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| 7 | |
When multiple rate of return values are possible for a rate of return equation, one way to come up with a single value which satisfies the equation is: |
| | A) | Solve for the internal rate of return |
| | B) | Use the project net investment procedure |
| | C) | Eliminate all rate of return values above 100% |
| | D) | Eliminate all rate of return values below 0% |
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| 8 | |
In calculating a composite or external rate or return for a given cash flow sequence, if the reinvestment interest rate is greater than the internal rate of return, the resulting rate of return will be: |
| | A) | Lower than the internal rate of return |
| | B) | Greater than the internal rate of return |
| | C) | Greater than the reinvestment interest rate |
| | D) | Equal to the difference between the internal rate of return and the reinvestment interest rate |
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| 9 | |
If a company invests $10,000 and receives $2,775 per year for five years, the rate of return on the investment is nearest to: |
| | A) | 8% |
| | B) | 10% |
| | C) | 12% |
| | D) | 18% |
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| 10 | |
If an investor buys stock for $30,000 and receives dividends of $3,000 per year for five years and then sells the stock for $40,000, the rate of return on the investment is nearest to: |
| | A) | 6% |
| | B) | 8% |
| | C) | 10% |
| | D) | 15% |
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| 11 | |
A permanent scholarship fund is started through a donation of $100,000. If five scholarships of $5,000 each are awarded each year beginning ten years from now, the rate of return for the invested money is nearest to: |
| | A) | 6% |
| | B) | 10% |
| | C) | 14% |
| | D) | 20% |
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| 12 | |
A magazine subscription costs $45 per year at the beginning of each year, or $115 now for a three-year subscription. If the subscriber elects to pay the $115 now, the rate of return on the investment will be nearest to: |
| | A) | 10% |
| | B) | 18% |
| | C) | 25% |
| | D) | 35% |
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| 13 | |
If a person invests $100,000 now and receives $4,000 per quarter for 10 years, the nominal rate of return per year is nearest to: |
| | A) | 2% |
| | B) | 4% |
| | C) | 10% |
| | D) | 20% |
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| 14 | |
If an investment triples in value in seven years, the rate of return on the investment is nearest to: |
| | A) | 6% |
| | B) | 17% |
| | C) | 25% |
| | D) | 35% |
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