UNIVERSITY OF ECONOMICS AND LAW – VIETNAM NATIONAL UNIVERSITY – HCMC

MID-TERM EXAMINATION
Date: March 2023
Duration: 90 minutes

Student ID: .................................. Name:................................................

SUBJECT: FINANCIAL MANAGEMENT

Signature:

INSTRUCTIONS FOR FINAL EXAM

1. This is a closed book examination. No hand-written notes is allowed, without any exception
2. Paper dictionary (no e-dictionary) and calculator are allowed
3. No talking and No mobile phone used during the exam
4. Materials transferred (notes, paper dictionary, calculator…) are strictly prohibited
5. This exam paper consists of 9 sheets in total
6. The exam has a total of 100 points
7. Any violation will be considered as cheating and will receive ZERO of this course

GOOD LUCK!

1. Which of the following are downsides to having a corporation?

a. Double taxation
b. Forming a corporation cost more
c. Unlimited lability
d. More record keeping, operational processes and reporting

2. Zero-coupon bonds are 1ssued at prices below face value, and the 1nvestors return
comes
from the difference between the purchase price and the payment of face value at
maturity
a. True
b. False
3. An effective annual rate must be greater than an annual percentage rate
a. False
b. True

4. Three years Tom now, John will establish a trust fund to give his heirs $100,000 a
year forever. The fund is expected to earn a 5.75% p.a. rate OÊ return. How much
money
he deposits today to establish this trust find?
a. $1,739,130.43
b. $1,534,523.30
c. $1,555 146.84
d. $1,470,588.03

5. You have S500 that you would like to invest. The following interest rates are being
offered by ANZ. Which is the best deal?
a. 8.90% compounded annually
b. 8.80% compounded quarterly
c. 8.65% compounded monthly
d. All of the deals are indifferent

6. Five years from now you will receive cash flows of $75 per year. These cash flows will
continue forever. If the Interest rate 6% p.a., what is the present value of these cash
flows?
a. $799.68
b. $894.22
c. $934.07
d. $990.12

7. Kaiser Industries has bonds on the market making annual payments, with 14 years to
maturity, and selling for $1,382.01. At this price, the bonds yield 7.5%. What 1s the
coupon rate?
a. 8.00%
b. 9.00%
c. 10.50%
d. 12.00%

8. Joe purchases a $100 perpetuity on which payments begin In one year. Lynn purchases
a $100 perpetuity on which payments begin Immediately. Both annuities pay annual
payments. The applicable discount rate is 10%. Which one of the following statements
is true?
a. Joe's perpetuity 1s worth $100 more than Lyn’s
 b. Lyn’s perpetuity 1s worth $100 more than Joe`s
c. The perpetuities are worth equal value today
d. Joe’s perpetuity 15 worth $90.91 more than Lyn’s
e. Lyn’s perpetuity 15 is worth $90.91 more than Joe’s

9. An investor who pays $1,054.47 for a 3-year bond with a 7% coupon and sells the bond
I year later for $1,037.19. What is the rate of return over one year?
a. 5.00%
b. 5.33%
c. 6.46%
d. 7.00%

10. The current yield measures the bond's total rate of return
a. True
b. False

11. A 5% coupon bond paying semi-annual coupons is currently trading at a yield to

maturity (YTM) of 4.75%. If priced correctly, what price should the bond would be
trading at?
a. A premium
b. A discount
c. Face value
d. More information needed to answer this question

12. Ten years ago you enter into a 30-year $250,000 mortgage at a fixed rate of 12% p.a.
(compounding monthly). How much do you still owe the bank now?
a. $524,395,61
b. $450,948.47
c. $233,544.96

13. Different banks offer different interest rates. Which bank is the most attractive?
a. DAB Compounded yearly at 15% p.a.
b. SCB Compounded monthly at 14.5% p.a.
c. BIDV Compounded semi-monthly at 14.675% p.a.
d. VCB Compounded quarterly at 14.75% p.a.
14. Kaiser Industries has bonds on the market making annual payments, with 14 years to
maturity, and selling for $1,382.01. At this price, the bonds yield 7.5%. What is the
coupon rate?
a. 8.00%
b. 9.00%
c. 10.50%
d. 12.00%

15. You have $500 that you would like to invest. The following interest rates are being
offered by ANZ. Which is the best deal?
a. 8.90% compounded annually
b. 8.80% compounded quarterly
c. 8.65% compounded monthly
d. All of the deals are indifferent

16. Three years from now you will begin to receive cash flows of $100 per year. These
cash flows will continue forever. If the discount rate is 6%p.a., what is the present
value of these cash flows?
a. $1,320.16
b. $1,399.36
c. $1,483.33
d. $1,572.33

17. John, a financial manager of APC, is comparing two investment options, both pay at
8% p.a., compounded annually with the total of $120,000 of income. Option A pays
three annual payments of $40,000 each. Option B pays three annual payments starting
with $20,000 the first year followed by two annual payments of $50,000 each. Which
investment option should you choose?
a. It doesn't matter. Both options provide $120,000 of income
b. Option A is better, because it has the higher future value at the end of year three.
c. Option B is better, because it has a higher present value.
d. Option A is better, because it has a higher present value.

18. You decides to start saving for a vacation to Europe. Starting from today, you will
deposit $1,000 into a bank account at the beginning of each of the next 10 years. If the
interest rate is 5.625% p.a., how much will you have to spend on your vacation?
a. $12,259.63
b. $12,950.96
c. $13,679.45
 d. $14,495.48

19. Rob and Laura wish to purchase a new home. The price is $187,500 and they plan to
pay a down payment of $37,400. The First bank will lend them the remainder at 10%
p.a. compounded monthly for 30 years. The first payment is due one month from today.
What is the amount of their monthly payment?
a. $1,316.36
b. $1,645.45
c. $5,675.49
d. $15,922.49

20. You deposit $900 into a bank account today. Approximately how much interest (in
dollar amount) will be earned in just the second year if the interest rate is 7% p.a.
compounded annually?
a. $67.41
b. $63.00
c. $126.00
d. $105.62

21. What is the yield to maturity on a zero-coupon bond with the following terms?
Time to maturity 5 years
Face value $1,000,000
Current market price $543,987
a. 6.05%
b. 12.95%
c. 36.77%
d. 1.84%

22. All other things equal, the annuity received at the beginning of each period has greater
present value than does one received at the end of each period. (10 Points)
a. True
b. False

23. How much should you pay for a share of stock that offers a constant-growth rate of
10%, requires a 16% rate of return, and is expected to sell for $50 one year from
now?(10 Points)
a. $42.00
b. $45.00
 c. $45.45
d. $47.00

24. A payout ratio of 35% for a company indicates that: (10 Points).
a. 35% of dividends are plowed back for growth.
b. 65% of dividends are plowed back for growth.
c. 65% of earnings are paid out as dividends.
d. 35% of earnings are paid out as dividends.

25. ABC common stock is expected to have extraordinary growth of 20% per year for 2
years, at which time the growth rate will settle into a constant 6%. If the discount rate is
15% and the most recent dividend was $2.50, what should be the approximate current
share price? (10 Points)
a. $31.16
b. $33.23
c. $37.42
d. $47.77

26. What is the current yield of a bond with a 6% coupon that have the face value of
$1,000, 4 years until maturity, and a price of $750?
a. 6.0%
b. 8.0%
c. 12.0%
d. 14.7%

27. The goal of decisions made by financial managers should primarily focus on
Increasing which one of the following
a. size of the firm
b. growth rate of the firm
c. total sales
d. value per share of outstanding stock

28. Which of the following 1s Investing decision?

a. LVMH borrows 350 million Euros (€350 million) from Deutsche Bank.
b. Google 1ssues shares of stock to investors.
c. Petro Vietnam Gas Corp. spends S1 million to construct the LNG terminal.
d. None of the above
29. Johnston Corps preferred stocks have the par value of $120, and a stated dividend of
10% of par value. What 1s the market price of this preferred stock 1Ê 1nvestors in the
market require a 8% rate Of return?
a. $125
b. $120
c. $175
d. $150

30. ABC Ltd. that has earnings per share of $12.00 and pays out $4.00 per share as
dividends. What is the plowback ratio in ABC?
a. 25.00%
b. 33.33%
c. 66.67%
d. 75.00%