ACC00716 Finance Quiz 1: Solution and Answers - University

This document presents the completed solution for ACC00716 Quiz 1 in Finance. The quiz covers fundamental financial concepts, including the calculation of future value and present value for annuities and single cash flows, understanding of the role of financial regulatory bodies like ASIC, and the goals of company management. It tests knowledge on shareholder risk, agency problems in business organizations, and the priority of claims in bankruptcy scenarios. The provided answers show the student's responses and the correct answers, along with feedback for each question, offering a comprehensive review of the key topics tested in the quiz. The quiz was completed on March 29, 2018, and the student achieved a score of 8 out of 10.

Review Test Submission: ACC00716 Quiz 1
User Syed Muzzammil Ahmed Syed Muzzammil
Ahmed
Site Finance
Test ACC00716 Quiz 1
Started 29/03/18 04:05
Submitted 29/03/18 04:37
Due Date 01/04/18 23:00
Status Completed
Attempt Score 8 out of 10 points
Time Elapsed 32 minutes
Instructions Attempt all questions.
Results
Displayed
Submitted Answers, Correct Answers,
Feedback
 Question 1 1 out of 1 points
An annuity pays $50 each year-end for 20 years. What is the future value
(FV) of this annuity at the end of those 20 years, given that the discount
rate is 7%?
Selected
Answer: $2049.
77
Correct
Answer: $2049.
77
Response
Feedback: Good
work
 Question 2 1 out of 1 points
An annuity pays $10 each year-end for 50 years. What is the future value
(FV) of this annuity at the end of that 50 years given that the discount rate
is 5%?
Selected
Answer: $2093.
48
Correct
Answer: $2093.
48
Response
Feedback: Good
work
 Question 3

1 out of 1 points
Which agency oversees the fair reporting of financial information to
investors of publicly traded shares?
Selected
Answer: Australia Securities and Investments
Commission (ASIC)
Correct
Answer: Australia Securities and Investments
Commission (ASIC)
Response
Feedback: Good
work
 Question 4 0 out of 1 points
What is the proper goal for a company's management?
Selected
Answer: To maximise net income or
earnings
Correct
Answer: To maximise shareholder
wealth
Response
Feedback: That's not
correct
 Question 5 0 out of 1 points
Why do shareholders bear most of the risk of running a company?
Selected
Answer: Shares can be taken away at any time without
notice.
Correct
Answer: They only have a residual claim on the company's
cash flows.
Response
Feedback: That's not
correct
 Question 6 1 out of 1 points
In which form of business organisation is an agency problem most likely to
occur?
Selected
Answer: Corporati
on

Correct
Answer: Corporati
on
Response
Feedback: Good
work
 Question 7 1 out of 1 points
Which of the following is true?
Selected
Answer: If a company files for bankruptcy, preferred shareholders'
claims are paid prior to common shareholders' claims.
Correct
Answer: If a company files for bankruptcy, preferred shareholders'
claims are paid prior to common shareholders' claims.
Response
Feedback: Good
work
 Question 8 1 out of 1 points
What is the present value (PV) of $50,000 received 20 years from now,
assuming the interest rate is 4% per year?
Selected
Answer: $22,
819.35
Correct
Answer: $22,
819.35
Response
Feedback: Good
work
 Question 9 1 out of 1 points
Pam is in need of cash right now, and wants to sell the rights to a $2000
cash flow that she will receive six years from today. If the discount rate for
such a cash flow is 9.00%, then what is the fair price that someone should
be willing to pay Pam today for rights to that future cash flow?
Selected
Answer: $1192.
53
Correct
Answer: $1192.
53

Response
Feedback: Good
work
 Question 10 1 out of 1 points
Forever Insurance Company has offered to pay you or your heirs $100 per
year at the end of each year forever. If the correct discount rate for such a
cash flow is 13%, what the amount that you would be willing to pay
Forever Insurance for this set of cash flows?
Selected
Answer: $769.
23
Correct
Answer: $769.
23
Response
Feedback: Good
work
Thursday, 29 March 2018 04:38:20 o'clock AEDT