MGMT 640 9084 Financial Decision Making for Managers Practice Questions and Answers

MGMT 640 9084 Financial Decision Making for Managers Practice Questions and Answers Question 1 What is the future value of $1,000, placed in a saving account for four years if the account pays 9.00%, compounded quarterly? (Your answer should be correct to two decimal places.) Answer: 1,427.62 Hide Feedback SOLUTION: FV n = PV[FVF Question 2 i,16 ] Your brother, who is 6 years old, just received a trust fund that will be worth $24,000 when he is 21 years old. If the fund earns 0.09 interest compounded annually, what is the value of the fund today? Answer: 6,588.8813 SOLUTION: PV = FV / (1+i)^15 Question 3 If you were to borrow $8,600 over five years at 0.12 compounded monthly, what would be your monthly payment? Answer: 191.3 Hide Feedback SOLUTION: First, calculate Present value factor = 1/(1+i) n Next, calculate the PV annuity factor = 1 - Present Value Factor/ i Lastly, solve by dividing CF by the PV annuity factor. Question 4 Your uncle promises to give you $600 per quarter for the next five years. How much is his promise worth right now if the interest rate is 0.07 compounded quarterly? Answer: 10,051.73 Hide Feedback SOLUTION: First, calculate Present value factor = 1/(1+i) n Next, calculate the PV annuity factor = 1 - Present Value Factor/ i Lastly, solve by multiplying CF by the PV annuity factor. Question 5 A stock has an expected return of 0.13 and a variance of 0.22. What is Its coefficient of variation?