Questions 1 to 30: Select the best answer to each question. Note that a question and its answers may be split across a page break, so be sure that you have seen the entire question and all the answers before choosing an answer. 1. If you deposit $700 in an account today, and the money grows to $1,800 in 14 years, what rate of annual interest have you earned? A. 50 percent B. 4 percent C. 7 percent D. 10 percent 2. If you deposit $10,000 in an investment that yields 6 percent annually, how many years will it take for your investment to double in value? A. 20 years B. 15 years C. 12 years D. 18 years 3. Accountants suggest that assets should be valued at A. the lower of market or cost. B. the higher of market or cost. C. market. D. cost. 4. What is the required return using the CAPM if the stock's beta is 1.2, and the individual, who expects the market to rise by 13.2%, can earn 6.4% invested in a risk-free Treasury bill? A. 9.46% B. 24.58% C. 11.62% D. 14.56% 5. If annual interest rates are 10 percent, which of the following values is the lowest? A. The future value of a $100 investment after 3 years B. The future value of an investment after 4 years, if $100 is deposited annually C. The present value of an annuity that will pay $200 a year, at the end of each of the next 4 years D. The present value of an investment that will be worth $100 after 2 years 6. What is the future value of an annuity due if you deposit $1,500 per year for the next 5 years into an account that earns an interest rate of 5 percent annually? A. $8,703 B. $7,500 C. $8,288 D. $11,914 7. If $800 is deposited in a savings account that pays an interest rate of 5 percent annually, how much money will be in the account after 15 years? A. $384 B. $238 C. $1,609 D. $1,663 8. Which of the following would be the most likely cause of an increase in inventory turnover? A. The faster collection of accounts receivable B. Lowered sales C. An increase in the inventory level D. A reduction in the price of the product 9. Liabilities equal A. assets minus equity. B. equity minus assets. C. assets. D. equity. 10. To measure risk, the capital asset pricing model uses A. beta. B. an asset's standard deviation. C. the volatility of an asset's cash flows. D. the term during which the asset is held. 11. What is the future value of an ordinary annuity if you deposit $1,500 per year for the next 5 years into an account that earns an interest rate of 5 percent annually? A. $1,914 B. $8,288 C. $6,322 D. $7,500 12. An investor my reduce risk by selecting A. a cross-section of firms in the same industry. B. stocks with poorly correlated returns. C. stocks traded on organized exchanges. D. high beta stocks. 13. What is the future value of an ordinary annuity if you deposit $500 per year for the next 10 years in an account that earns an interest rate of 4 ...

1. Questions 1 to 30: Select the best answer to each question. Note
that a question and its answers may
be split across a page
break, so be sure that you have seen the entire question and all
the answers before choosing an
answer.
1. If you deposit $700 in an account today, and the money
grows to $1,800 in 14 years,
what rate of
annual interest have you earned?
A. 50 percent
B. 4 percent
C. 7 percent
D. 10 percent
2. If you deposit $10,000 in an investment that yields 6 percent
annually, how many years
will it take for
your investment to double in value?
A. 20 years

2. B. 15 years
C. 12 years
D. 18 years
3. Accountants suggest that assets should be valued at
A. the lower of market or cost.
B. the higher of market or cost.
C. market.
D. cost.
4. What is the required return using the CAPM if the stock's
beta is 1.2, and the
individual, who expects
the market to rise by 13.2%, can earn 6.4% invested in a risk-
free Treasury bill?
A. 9.46%
B. 24.58%
C. 11.62%
D. 14.56%
5. If annual interest rates are 10 percent, which of the following
values is the lowest?
A. The future value of a $100 investment after 3 years
B. The future value of an investment after 4 years, if $100 is
deposited annually

3. C. The present value of an annuity that will pay $200 a year, at
the end of each of the next 4 years
D. The present value of an investment that will be worth $100
after 2 years
6. What is the future value of an annuity due if you deposit
$1,500 per year for the next 5
years into an
account that earns an interest rate of 5 percent annually?
A. $8,703
B. $7,500
C. $8,288
D. $11,914
7. If $800 is deposited in a savings account that pays an interest
rate of 5 percent
annually, how much
money will be in the account after 15 years?
A. $384
B. $238
C. $1,609

4. D. $1,663
8. Which of the following would be the most likely cause of an
increase in inventory
turnover?
A. The faster collection of accounts receivable
B. Lowered sales
C. An increase in the inventory level
D. A reduction in the price of the product
9. Liabilities equal
A. assets minus equity.
B. equity minus assets.
C. assets.
D. equity.
10. To measure risk, the capital asset pricing model uses
A. beta.
B. an asset's standard deviation.
C. the volatility of an asset's cash flows.
D. the term during which the asset is held.
11. What is the future value of an ordinary annuity if you
deposit $1,500 per year for the
next 5 years into

5. an account that earns an interest rate of 5 percent annually?
A. $1,914
B. $8,288
C. $6,322
D. $7,500
12. An investor my reduce risk by selecting
A. a cross-section of firms in the same industry.
B. stocks with poorly correlated returns.
C. stocks traded on organized exchanges.
D. high beta stocks.
13. What is the future value of an ordinary annuity if you
deposit $500 per year for the
next 10 years in an
account that earns an interest rate of 4 percent annually?
A. $5,263
B. $6,003
C. $1,700
D. $5,000
14. A beta coefficient for a risky stock is
A. equal to 1.0.

6. B. negative.
C. less than 1.0.
D. greater than 1.0.
15. Which of the following types of ratio is used to measure
activity?
A. Profitability ratio
B. Turnover ratio
C. Liquidity ratio
D. Leverage ratio
16. If an account currently has a value of $84,000 and earns an
interest rate of 4 percent
annually, for how
many years can you withdraw $10,000 from the account?
A. 8
B. 20
C. 10
D. 12
17. The current ratio excludes
A. inventory.
B. accrued interest.

7. C. paid-in capital.
D. cash equivalents.
18. What is the present value of an annuity due if you deposit
$1,200 per year for the next
5 years into an
account that earns an interest rate of 5 percent annually?
A. $6,703
B. $8,288
C. $5,455
D. $5,195
19. A current ratio is presently 2 : 1 for a corporation that sells
sporting goods. Which of
the following
statements about the ratio is correct?
A. The current ratio is unchanged by using cash to retire
accounts payable.
B. The current ratio is affected by exchanging bonds for stock.
C. The current ratio is increased by purchasing a store with
cash, with potential to increase corporate
sales.
D. The quick ratio is smaller than the current ratio.

8. 20. If the interest rate on an account is 8 percent annually, what
is the present value of
$40,000 to be
received 5 years from today?
A. $10,018
B. $6,188
C. $22,073
D. $27,223
21. A stock is currently selling for $45 a share. What is your
gain/loss if you sell the
stock short and the
price rises to $62?
A. You would gain $17 per share.
B. You would gain $13 per share.
C. You would lose $0 per share.
D. You would lose $17 per share.
22. Which of these statements best describes the function of a
preliminary prospectus?
A. A preliminary prospectus is the document that registers a
new security issue with the Securities

9. and Exchange Commission
(SEC) and on which the SEC bases its approval or disapproval
of the issue for the general investing
public.
B. A preliminary prospectus, or "red herring," serves to provide
both valid information about the
proposed issue and conflicting
information designed to confuse potential purchasers of the
issue.
C. A preliminary prospectus announces to the SEC and the
investing public the terms of a new public
issue, including the issuer's
planned use of the proceeds of the sale and the proposed price
of the issue.
D. A preliminary prospectus informs the investing public about
many of the terms of a proposed new
security offering.
23. Entering an order to sell stock at $17 when the bid is $18 to
$19 is an example of a
A. limit order.
B. margin payment.
C. market order.

10. D. short sale.
24. The International Monetary Fund
A. developed to help the Federal Reserve control U.S.
investments abroad.
B. buys foreign securities.
C. holds a pool of currencies.
D. can lend a country currencies to meet a surplus in its
merchandise trade balance.
25. Foreign investments may be financed by issuing
A. London Interbank Bonds.
B. Euro dollars.
C. Eurobonds.
D. IMF reserve securities.
26. Which of the following best explains a potential
disadvantage of leaving securities in
street name?
A. In the event of class action suits against securities issuers,
the custodian, not the beneficial owner
(customer), is the only party
that may benefit from court orders.
B. Correspondence sent by securities issuers may not be
forwarded to brokerage clients who own

11. securities held in street name.
C. Securities held in street name can't be quickly purchased or
sold.
D. Securities held in street name become the property of the
custodian and the customer is only
beneficiary of the securities.
27. Which of the following is a federally insured investment?
A. A savings account in a national commercial bank
B. Commercial bank assets
C. A life insurance policy
D. A certificate of deposit in excess of $100,000
28. When investing in securities, an investor may place a limit
order that
A. establishes the exchange on which the security is to be
bought or sold.
B. limits the amount of commissions.
C. states a price at which the investor seeks to buy or sell the
stock.
D. specifies when the stock will be purchased.
29. Which of the following assets is the most liquid?
A. Stocks and bonds

12. B. Savings accounts and checking accounts
C. Bonds and real estate
D. Money and antiques
30. The reserves of commercial banks must be held against
A. losses.
B. the bank as equity.
C. commercial loans.
D. savings deposits.
Section Analysis
Section Analysis
Criteria Ratings Pts
Quality of
Financial
Analysis and
Use of Financial
tools
Financial analysis is
fully discussed;

13. financial tools are
used well.
50.0 pts
Financial analysis
is discussed;
financial tools are
used.
30.0 pts
A discussion of financial
analysis is attempted;
financial tools are
attempted.
15.0 pts
Financial analysis is poorly
discussed or not all; financial
tools are used incorrectly or
not at all.
5.0 pts

14. 50.0 pts
Conclusion
Conclusion is well
developed in reasonable
way and clear.
30.0 pts
Conclusion is well
developed somewhat
reasonable way and fair.
20.0 pts
Conclusion needs to be
developed in reasonable
way.
10.0 pts
Conclusion needs
to be rewritten.
5.0 pts

15. 30.0 pts
Mechanics and
Format of
criterion
APA format is
followed exactly; no
grammatical, spelling,
or punctuation errors.
20.0 pts
APA format is followed
most of the time, almost
no grammatical, spelling,
or punctuation errors.
15.0 pts
APA format has
errors; a few
grammatical, spelling,
or punctuation errors.
10.0 pts

16. APA format not
followed; many
grammatical, spelling,
or punctuation errors.
5.0 pts
20.0 pts
Total Points: 100.0