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Exam (elaborations) FIN 515 FINANCIAL MANAGEMENT (FIN515)
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Exam (elaborations) FIN 515 FINANCIAL MANAGEMENT (FIN515)
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FIN 515 MIDTERM EXAMQuestion 1.Question : (TCO G) The firm's equity multiplier measures
Student Answer:
the value of assets held per dollar of shareholder equity.
the return the firm has earned on its past investments.
the firm's ability to sell a product for more than the cost of
producing it.
how efficiently the firm is utilizing its assets to generate sales.
Instructor Chapter 2
Explanation:
Points Received: 10 of 10
Comments:
Question 2.Question : (TCO G) The DuPont Identity expresses the firm's ROE in terms of
Student Answer:
profitability, asset efficiency, and leverage.
valuation, leverage, and interest coverage.
profitability, margins, and valuation.
equity, assets, and liabilities.
Instructor Chapter 2
Explanation:
Points Received: 10 of 10
Comments:
Question 3.Question : (TCO B) You plan on retiring in 20 years. You currently have
$275,000 and think you will need $1,000,000 to retire. Assuming
you don’t deposit any additional money into the account, what
annual return will you need to earn to meet this goal?
Student Answer: N = 20 PV = $275,000 FV = $1,000,000 CPT for i/y i/y = 6.67% If;
I planned to retire in 20 and I dont deposit any additional money
into the account my annual return would need to be 6.67% in order
to meet my foal of $1,000,000.
Instructor Week 2 Lecture and Chapter 4
Explanation: PV 275000
FV 1000000
N 20
I answer 6.66%
PMT 0
Either PV or FV
must be negative
Points Received: (not graded)
Comments:
Question 4.Question : (TCO B) You start saving $100 per month in an account that pays
, 5% interest, compounded monthly. You make the payment at the
beginning of each month and interest is applied at the end of each
month. How much money will you have in the account in 5 years?
Show your work.
Student Answer: N = 5 (5 x 12) = 60 i/y = 5% (.) = 2.50% PV = $100 PMT/CF
= $100 FV = $6,497.35 If; I deposit $100 into an account that pays
5% compounded month and make a $100 monthly payment in five
years I would have $6,497.35
Instructor Week 2 Lecture and Chapter 4
Explanation: PV 0
FV answer $6800.61
N 5*12=60
I .05/12=.0041667
PMT 100
Points Received: (not graded)
Comments:
Question 5.Question : (TCO B) A grandfather sets up a trust for his only grandchild. The
trust consists of an annuity that will pay $5,000 monthly to the
grandchild for 18 years. The annuity pays an annual return of 5%
and makes the payments monthly at the end of the month. Return
on the annuity is 5% annually. The payments to the grandchild are
paid at the beginning of the month. The annuity will have a value
of $0 at the end of the 18 years. How much needs to be deposited to
set up the annuity? Show your work.
Student
Answer:
Instructor Week 2 Lecture and Chapter 4
Explanation: PV answer 711,201
FV 0
N 216
I .05/12=.0041667
PMT 5000
Points Received: (not graded)
Comments:
Question 6.Question : (TCO B) You have a two children, A and B. Child A is not going to
college but is working in a business to learn the ropes. Child A
plans on opening a business someday. Child B is attending college.
You put a certain amount of money into an account. From this
account, Child B will receive $2,000 per month for the next four
years. Whatever is left at that time will go to Child A to help start
the business. You want Child A to receive $96,000 at that time. The
account pays 7% annually, compounded monthly. How much
money do you need to start the account? Show your work.
Student Answer: Child B Receiving = $2,000 x 48 = $96,000 in four years Child A
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