ABA CTFA Practice Test - Questions Answers, Page 32

A firm that makes secured and unsecured personal loans to qualified individuals, also called a small loan company is called:

With continuous compounding at 10 percent for 30 years, the future value of an initial investment of $2,000 is closest to:

You want to buy an ordinary annuity that will pay you $4,000 a year for the next 20 years. You expect annual interest rates will be 8 percent over that time period. The maximum price you would be willing to pay for the annuity is closest to:

A profitability index of .85 for a project means that:

BackInSoon, Inc., has estimated that a proposed project's 10-year annual net cash benefit, received each year end, will be $2,500 with an additional terminal benefit of $5,000 at the end of the tenth year. Assuming that these cash inflows satisfy exactly BackInSoon's required rate of return of 8 percent, calculate the initial cash outlay. (Hint: With a desired IRR of 8%, use the IRR formula: ICO = discounted cash flows.)

Which of the following statements is correct?

Assume that a firm has accurately calculated the net cash flows relating to an investment proposal. If the net present value of this proposal is greater than zero and the firm is not under the constraint of capital rationing, then the firm should:

A project's profitability index is equal to the ratio of the of a project's future cash flows to the project's .

The discount rate at which two projects have identical is referred to as Fisher's rate of intersection.