Multiple choice questions on cash, fund management and bond valuation.

1. Average daily remittances are $5 million, and "extended disbursement float" adds 3 days to the disbursement schedule, how much should the firm be willing to pay for a cash management system if the firm earns 10% on excess funds.

a.         $500,000

b.        $1,500,000

c.         $1,000,000

d.        $0

2. What is generally the largest source of short-term credit small firms?

a.         Bank loans

b.        Commercial paper

c.         Installment loans

d.        Trade credit

3. A large manufacturing firm has been selling on a 3/10, net 30 basis. The firm changes its credit terms to 2/20, net 90. What change might be expected on the balance sheets of its customers?

a.         Decreased receivables and increased bank loans

b.        Increased receivables and increased bank loans

c.         Increased payables and decreased bank loans

d.        Increased payables and increased bank loans

Since the discount percentage is reduced from 3% to 2% and the credit period is increasd from 30 days to 9 days,the customers will be inclined to delay the payments and this will result in increase in their payables. Consequently, other souurce of finance, viz. bank loans will decrease.

4. If you were to put $1,000 in the bank at 6% interest each year for the next ten years, which table would you use to find the ending balance in your account?

a.         Present value of $1

b.        Future value of $1

c.         Present value of an annuity of $1

d.        Future value of an annuity of $1

5. You are to receive $12,000 at the end of 5 years. The available yield on investments is 6%. Which table would you use to determine the value of that sum today?

a.         Present value of an annuity of $1

b.        Future value of an annuity

c.         Present value of $1

d.        Future value of $1

6. Global capital markets are influenced by

a.         interest rates.

b.        investor confidence.

c.         relative economic growth.

d.        all of the above.

7. The efficient market hypothesis deals primarily with

a.         random speculation in securities.

b.        the degree to which prices adjust to new information.

c.         degrees to which price movements are the result of past trends.

d.        how an investor can significantly outperform the market in general.

8. Which of the following is not one of the components that makes up the required rate of return on a bond?

a.         risk premium

b.        real rate of return

c.         inflation premium

d.        maturity payment