Question

Assume XYZ total assets $1,000,000 and net fixed $600,000. But current liabilities $200,000. Calculate the company current ratio? Select one

: a. 3x

b. 2x

c. 1.5x

d. 4x

q2:An investor is considering purchasing a 10-year zero-coupon bond of $1,000 par value. If the current interest rate for equally risky bonds is 13%. The bond will be sold at? Select one:

a. Premium.

b. Fair value.

c. Discount.

Assume a bond is trading at par, and it pays a coupon rate of 3%, what is the current yield? Select one:

a. 4%.

b. 3%.

c. 6%.

d. 5%

if your intial deposits in ZX bank $12,000 with annual interest 6% paid monthly. How much you will have after 10 years?
Select one:
a. $21,832.7
b. $21,490.1
c. $27,200
d. 24,546.7

Answer 1

Answer to 1: Calculation of Current Ratio

Current Ratio = Current Assets/ Current Liabilities

Current Assets= Total Assets - Net Fixed Assets

= 1000000-600000

= $ 400000

Therefore

Current Ratio = 400000/200000

= 2x

Answer to 2: Zero coupon bonds are those bonds which does not provide coupon payment periodically. Rather they are issued at discount. Zero coupon Bondholder receives the face value of bond at the end of maturity period.

Therefore zero coupon bond will be sold at discount.

Answer to 3: Calculation of Current Yield

Current Yield = Interest/ Initial Investment

If bond is trading at par, it means investment made is equal to par value of bond. Therefore, coupon rate and current yield will be equal.

Therefore current yield is 3% i.e. equal to coupon rate.

Answer to 4: Calculation of Future Value

In the given case, as interest is made monthly, there is monthly compounding. Calculation of future value is as follow:

Future Value = (Initial Deposit * (1+ (r%))ⁿ)

r% means rate of interest which is connverted to monthly rate and n is no. of period which is 120 months.

r = 6/1200=0.005

= (12000 * (1+ 0.005)¹²⁰)

= 12000 *1.8193967

= $ 21832.76