PLEASE GIVE CORRECT ANSWERS

1. If a firm has earnings before income and taxes of $15 M, interest income of $2 M, and pays 10% in federal taxes, what is that firm's net income

A.

not enough information provided to answer question

B.

$13.5 M

C.

$15.3 M

D.

$11.7 M

2. What does the law of one price state?

A.

the price of two assets that produce the same cash flows should be the same

B.

all assets must have the same price

C.

the price of two assets that produce different cash flows should be the same

D.

the price of any two assets must be equal regardless of the cash flows they produce

3. Sarah expects to receive a $1000 payment 8 years from today (payment is received in period 8, today is period 0). If the interest rate is 3% which of the following (approximately) represents the present value of this cash flow?

Note: When using your calculator to answer this question round to the nearest hundreth. For instance, if you have a number that reads 1.987505 round this number to 1.99.

A.

1266

B.

1000

C.

787

D.

971

4. Which of the following is true regarding the stock market?

A.

Both public and private companies' stock is listed on the stock market

B.

It is an organized exchange where a public corporation's stock can be traded

C.

There are no requirements to get listed on the stock market

D.

The NYSE and the SEC are the two biggest stock market exchanges in the United States