Free CMA Exam Braindumps (page: 154)

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An annual payment in perpetuity of $1,000 per year beginning immediate is said to offer a 12% interest rate. What is its present value?

  1. $8,33333
  2. $9,33333
  3. $10,000
  4. $12,000

Answer(s): B

Explanation:

At 12%. the factor for the present value of an annuity approaches 8.33333. That assumes the first payment is one year away, Since the first payment is today, 1.00 must be added to the above (actor, resulting in 9.33333. Multiplying 933333 times $1,000 results in a present value of $9,333 33.



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What is the rate of return for an investor who pays $1,054.47 for a three-year bond with a 7% coupon and sells the bond 1 year later for $1 .037.19?

  1. 5%
  2. 5.08%
  3. 6.64%
  4. 7%

Answer(s): A

Explanation:

The investor would have a loss of $17.28 on the sale ($1,054.47-- $1 .037.19). The $17.28 loss would partial offset the $70 of interest income, reusing in a net return of $52.72 ($70-- $17.28). Dividing the $52.72 by the $1,054.47 original investment results in a 5% return.



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In calculating the total value of a bond, how much does the $1,000 to be received upon a bond's maturity in 4 years add to the bond's price if the discount rate is 6%?

  1. $208.00
  2. $747.00
  3. $763.00
  4. $792.00

Answer(s): D

Explanation:

The 6% present value factor for four years is .792. Multiplying that times $1,000 results value of $792.00.



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During the most recent fiscal year, Dongata Industries earned net income after tax of $3,288,000. The company paid preferred share dividends of $488,000 and common share dividends of $1,000,000. The current market price of Dogmata's common shares is $56 per share. and the shares are trading at a price-earnings rate of 8. How many common shares does Donate have outstanding?

  1. 350,000
  2. 400,000
  3. 411.000
  4. 469,714

Answer(s): B

Explanation:

Using known relationships, Dogmata's outstanding common stock can be determined as follows:



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