1. (a) Define the quick ratio (i.e., acid-test ratio) and return on equity ratio, and state what these financial ratios measure.
(b) State what financial management problem each of these financial ratios could be used to identify. (c) Could the optimal value of a financial ratio for a firm be different in different years? Explain.
2. Calculate the present value of a bond that pays a coupon rate of 4% per year for 15 years, and matures in 15 years at its face value of $1000, using each of the following current market interest rates as the discount rate: (a) 2%; (b) 4%; (c) 7%. Show your calculations.
These two questions belong to finance and they are about ratio analysis and discounted interest rates. The first question is about various financial ratios like quick ratio, return on equity ratio, etc. the second question is about discounted interest rates. For the second question’s answer, please refer to the Excel sheet.
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