Questions from Corporate Finance

Q: First Simple Bank pays 7 percent simple interest on its investment accounts

First Simple Bank pays 7 percent simple interest on its investment accounts. If First Complex Bank pays interest on its accounts compounded annually, what rate should the bank set if it wants to match...

Q: What is the primary disadvantage of the corporate form of organization?

What is the primary disadvantage of the corporate form of organization? Name at least two advantages of corporate organization.

Q: Suppose a company’s operating cash flow has been negative for several years

Suppose a company’s operating cash flow has been negative for several years running. Is this necessarily a good sign or a bad sign?

Q: You are looking at an investment that has an effective annual rate

You are looking at an investment that has an effective annual rate of 17 percent. What is the effective semiannual return? The effective quarterly return? The effective monthly return?

Q: You receive a credit card application from Shady Banks Savings and Loan

You receive a credit card application from Shady Banks Savings and Loan offering an introductory rate of 1.5 percent per year, compounded monthly for the first six months, increasing thereafter to 18...

Q: You are planning to save for retirement over the next 30 years

You are planning to save for retirement over the next 30 years. To do this, you will invest $700 a month in a stock account and $300 a month in a bond account. The return of the stock account is expec...

Q: You have an investment that will pay you 1.17 percent

You have an investment that will pay you 1.17 percent per month. How much will you have per dollar invested in one year? In two years?

Q: You want to be a millionaire when you retire in 40 years

You want to be a millionaire when you retire in 40 years. How much do you have to save each month if you can earn a 12 percent annual return? How much do you have to save if you wait 10 years before y...

Q: You’ve just joined the investment banking firm of Dewey, Cheatum,

You’ve just joined the investment banking firm of Dewey, Cheatum, and Howe. They’ve offered you two different salary arrangements. You can have $95,000 per year for the next two years, or you can have...

Q: You have just won the lottery and will receive $1,

You have just won the lottery and will receive $1,000,000 in one year. You will receive payments for 30 years, which will increase 5 percent per year. If the appropriate discount rate is 8 percent, wh...