1. How much would $5,000 due in 25 years be worth today if the discount rate were 5.5%? (Points : 2)
Question 2.2. Chuck has $2,500 invested in a bank that pays 4% annually. How long will it take for his funds to double? (Points : 2)
Question 3.3. Ellen now has $125. How much would she have after 8 years if she leaves it invested at 8.5% with annual compounding? (Points : 2)
Question 4.4. Suppose an ExxonMobil Corporation bond will pay $4,500 ten years from now. If the going interest rate on safe 10-year bonds is 4.25%, how much is the bond worth today? (Points : 2)
Question 5.5. You plan to invest in securities that pay 8.0%, compounded annually. If you invest $5,000 today, how many years will it take for your investment to grow to $9,140.20? (Points : 2)
Question 6.6. Suppose you have $1,500 and plan to purchase a 5-year certificate of deposit (CD) that pays 3.5% interest, compounded annually. How much will you have when the CD matures? (Points : 2)
Question 7.7. Which of the following statements is CORRECT? (Points : 2)
It is generally more expensive to form a proprietorship than a corporation because, with a proprietorship, extensive legal documents are required.
Corporations face fewer regulations than sole proprietorships.
One disadvantage of operating a business as a sole proprietorship is that the firm is subject to double taxation, at both the firm level and the owner level.
One advantage of forming a corporation is that equity investors are usually exposed to less liability than in a regular partnership.
If a regular partnership goes bankrupt, each partner is exposed to liabilities only up to the amount of his or her investment in the business.
Question 8.8. A $150,000 loan is to be amortized over 7 years, with annual end-of-year payments. Which of these statements is CORRECT? (Points : 2)
The annual payments would be larger if the interest rate were lower.
If the loan were amortized over 10 years rather than 7 years, and if the interest rate were the same in either case, the first payment would include more dollars of interest under the 7-year amortization plan.
The proportion of each payment that represents interest as opposed to repayment of principal would be higher if the interest rate were lower.
The proportion of each payment that represents interest versus repayment of principal would be higher if the interest rate were higher.
Question 9.9. Which of the following statements is CORRECT? (Points : 2)
One of the disadvantages of incorporating a business is that the owners then become subject to liabilities in the event the firm goes bankrupt.
Sole proprietorships are subject to more regulations than corporations.
In any type of partnership, every partner has the same rights, privileges, and liability exposure as every other partner.
Sole proprietorships and partnerships generally have a tax advantage over many corporations, especially large ones.
Question 10.10. Cheers Inc. operates as a partnership. Now the partners have decided to convert the business into a regular corporation. Which of the following statements is CORRECT? (Points : 2)
Assuming Cheers is profitable; less of its income will be subject to federal income taxes.
Cheers will be subject to fewer regulations.
Cheers’ shareholders (the ex-partners) will now be exposed to less liability.
Cheers’ investors will be exposed to less liability, but they will find it more difficult to transfer their ownership.