Question 1

Beatrice has $200 in the bank earning 8%. The future value of the $200 in two years is about:

Accepted Answer

The future value (FV) of an investment is calculated using the formula FV = PV(1 + r)^n, where PV is the present value, r is the annual interest rate, and n is the number of years. For Beatrice's investment, FV = $200(1 + 0.08)^2 = $200(1.08)^2 = $200 * 1.1664 = $233.28, which is approximately $233.

Question 2

Amos has $1,000 in the bank earning 9%. The future value of the $1,000 in two years is about:

Accepted Answer

The future value of an investment is calculated using the formula FV = PV(1 + r)^n, where PV is the present value, r is the annual interest rate, and n is the number of years. For Amos's investment, FV = $1,000(1 + 0.09)^2 = $1,000(1.09)^2 = $1,188.

Question 3

Natalie has $800 in the bank earning 8%. What is the future value of the $800 in one year?

Accepted Answer

The answer of Natalie has $800 in the bank earning...

Question 4

Gina has $1,000 in the bank earning 6%. What is the future value of the $1,000 in one year?

Accepted Answer

The future value of $1,000 in one year at a 6% interest rate is calculated as $1,000 * (1 + 0.06) = $1,060.

Question 5

If the future value of a sum in one year is $440 and the annual interest rate is 10%, what is the present value?

Accepted Answer

The present value (PV) can be calculated using the formula PV = FV / (1 + r), where FV is the future value ($440), and r is the interest rate (10% or 0.10). Thus, PV = $440 / (1 + 0.10) = $400.

Question 6

If the future value of a sum in one year is $800 and the annual interest rate is 10%, what is the present value?

Accepted Answer

The present value (PV) can be calculated using the formula PV = FV / (1 + r), where FV is the future value ($800), and r is the interest rate (10% or 0.10). Thus, PV = $800 / (1 + 0.10) = $800 / 1.10 = $727.27, rounded to $727.

Question 7

The price of ABC Corporation's stock is $10, and 3,000 shares are outstanding. The price of XYZ Corporation's stock is $8, and 4,000 shares are outstanding. Based on this information, which company has the higher value? Explain your answer.

Accepted Answer

The answer of The price of ABC Corporation's stock is...

Question 8

How does growth of expected earnings impact a stock's price to earnings (P/E) ratio?

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Question 9

How do long-term interest rates impact the price to earnings (P/E) ratio?

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Question 10

Identify and explain the general attributes of a typical bond.

Accepted Answer

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Question 11

Explain the relationship between interest rates and bond prices.

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Question 12

Ethan is a financial investor. Why would he purchase a B rated bond over an AAA rated bond?

Accepted Answer

The answer of Ethan is a financial investor. Why would...

Question 13

Why is it difficult for experts to beat the overall stock market return?

Accepted Answer

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Question 14

Identify three guidelines mentioned in your textbook for investing in stocks and bonds.

Accepted Answer

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Question 15

Edrena has purchased stocks from five companies. Two companies are in the oil and gas industry, two are in the transportation industry, and one is in the telecommunications industry. Is she diversified? Why or why not?

Accepted Answer

The answer of Edrena has purchased stocks from five companies....

Question 16

XYZ Corporation is deciding whether to spend $500,000 to open a new manufacturing plant or invest the $500,000 in bonds earning 5% per year. The expected profit on the new plant is $50,000 per year for the next 15 years. Which decision is the most profitable for the firm? Explain your answer.

Accepted Answer

The answer of XYZ Corporation is deciding whether to spend...

Quiz 10: Stocks and Bonds