# Finance

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Solution Library **

#### Use of Rights in Financing-Multiple Choice Question

Question Which of the following statements is false with respect to the use of rights in financing? A. Rights offerings are used by many U.S. companies. B. Shares are usually priced at a premium. C. Right offerings are especially popular in Europe. ... Read More

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#### Selling of Securities in Financial Markets-Multiple Choice Question

Question When a corporation uses the financial markets to raise new funds, the sale of securities is made in the A. primary market. B. secondary market. C. on-line market. D. third market. ... Read More

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#### An Operating Motive for Merger and Consolidation-Multiple Choice Question

Question Which of the following is not a financial motive but rather an operating motive for merger and consolidation? The portfolio diversification effect Tax-loss carryforward Greater financing capability Synergy ... Read More

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#### Calculation of Interest Rates for given Returns

Question Calculate Interest Rates/Solve for the known interest rate in each of the following: Present Value Years Interest Rate Future Value 410 &n ... Read More

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#### Calculation of Present Value of Cash Flows

Question Present Value and Multiple Cash Flows: Conoly Co. has identified an investment project with the following cash flows. If the discount rate is 10 percent, what is the present value of theses cash flows? What is the present value at 18 percent? At 24 %? ... Read More

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#### Calculation of Present Value of Multiple Cash Flows

Question Present Value and Multiple Cash Flows: Investment X offers to pay you $4,500 per year for nine years, whereas Investment Y offers to pay you $7,000 per year for five years. Which of these cash flow streams has the higher present value if the discount rate is 5 percent? If ... Read More

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#### Calculation of Annuities of an Investment

Question Calculating Annuities: You are planning to save for retirement over the next 30 years. To do this, you will invest $800 a month in a stock account and $350 a month in a bond account. The return of the stock account is expected to be 11 percent, and the bond account will pa ... Read More

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#### Calculation of Balloon Payment for a Purchased Property

Question Balloon Payments: Audrey Sanborn has just arranged to purchase a $550,000 vacation home in the Bahamas with a 20 percent down payment. The mortgage has 6.1 percent stated annual interest rate, compounded monthly, and calls for equal monthly payments over the next 30 years. &nbs ... Read More

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#### Valuation and Factors Affecting Prices of Bonds

Question Which, if any, of the following statements are false? For a given coupon rate, the sensitivity of bond prices to changes in interest rates increases at an increasing rate as maturity increases. For a given absolute change in interest rates from the same base level, the proportionate in ... Read More

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#### Calculation of Percentage Change in Bonds Price when Interest Rate Changes

Question What are the duration and modified duration of a seven-year, 3.5 percent coupon rate, annual coupon payment, $1000 par value government note priced today to yield 3 percent to maturity (use the text formulas or Excel’s Duration and MDuration functions)? What is the convexity of ... Read More

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#### Fundamental Relationship between Stock Prices and Interest Rates

Question Consider the dividend discount model, the capital asset pricing model, the arbitrage pricing model and the firm valuation model. If these accurately portray the intrinsic values of stock prices and stock returns, then what is the corresponding fundamental relationship between stock p ... Read More

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#### Unethical Management Practices Adopted in Preparation of a Companyâ€™s Income Statement

Question David, supervisor for the ABC Corporation, is preparing the company’s income statement at year-end of 2014. He notes that the company had decided and replaced one of its equipment and lost $60000 on the sale of that equipment which was costs 150000 and its depreciation is $50000. Sin ... Read More

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