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1. A company has a current ratio of 1.5 and a quick ratio of
0.8. What is its inventory turnover ratio?
a) 0.53
b) 1.88
c) 2.35
d) 3.75
Answer: b) 1.88
Rationale: The inventory turnover ratio is calculated as
(current ratio - quick ratio) / quick ratio. Therefore, (1.5 -
0.8) / 0.8 = 1.88.
2. A bond has a face value of $1000, a coupon rate of 8%,
and a maturity of 10 years. What is its yield to maturity if it
is currently selling for $950?
a) 8.72%
b) 8.42%
c) 8.16%
d) 7.89%
Answer: b) 8.42%
Rationale: The yield to maturity is the discount rate that
equates the present value of the bond's cash flows to its
price. Using a financial calculator or spreadsheet, we can
find that the yield to maturity is 8.42%.
3. A project has an initial outlay of $5000, a cash inflow of
$2000 per year for four years, and a required rate of return
of 12%. What is its net present value?
a) $1136.35
b) $1289.24
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