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Finance Calculation Questions and Answers

Practice technical finance calculation questions with answers on NPV, WACC, CAPM, bonds, ratios, margin, FX, options, and portfolio math.

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1 A project costs 100000 today and pays 40000 per year for 3 years. At a 10 percent discount rate, the NPV is closest to:
Answer: minus 524

PV of inflows is 40000 times 2.4869, or about 99476, so NPV is about minus 524.

  1. minus 524
  2. plus 20000
  3. plus 9948
  4. minus 20000
2 You invest 5000 for 4 years at 6 percent compounded annually. The future value is closest to:
Answer: 6312

FV equals 5000 times 1.06 to the fourth, about 6312.

  1. 6312
  2. 6200
  3. 5960
  4. 5620
3 A bond pays a 5 percent annual coupon on 1000 par and yields 6 percent with 3 years to maturity. Price is closest to:
Answer: 973

Price equals PV of 50, 50, and 1050 discounted at 6 percent, about 973.

  1. 973
  2. 1000
  3. 1050
  4. 943
4 A stock has beta 1.2, risk-free rate 4 percent, and market risk premium 6 percent. CAPM required return is:
Answer: 11.2 percent

Required return equals 4 percent plus 1.2 times 6 percent, or 11.2 percent.

  1. 11.2 percent
  2. 7.2 percent
  3. 10.0 percent
  4. 12.8 percent
5 A firm has 40 percent debt at 7 percent pre-tax cost, 60 percent equity at 12 percent cost, and tax rate 25 percent. WACC is closest to:
Answer: 9.3 percent

WACC equals 0.4 times 7 percent times 0.75 plus 0.6 times 12 percent, or 9.3 percent.

  1. 9.3 percent
  2. 10.0 percent
  3. 8.0 percent
  4. 11.5 percent
6 Revenue is 500000, variable cost ratio is 60 percent, and fixed costs are 120000. Operating profit is:
Answer: 80000

Contribution is 40 percent of 500000, or 200000. Less fixed costs gives 80000.

  1. 80000
  2. 200000
  3. 180000
  4. 120000
7 A company has current assets of 240000 and current liabilities of 160000. Current ratio is:
Answer: 1.50

Current ratio equals current assets divided by current liabilities, 240000 over 160000.

  1. 1.50
  2. 0.67
  3. 2.40
  4. 0.50
8 Inventory is 30000, current assets are 150000, and current liabilities are 100000. Quick ratio is:
Answer: 1.20

Quick ratio removes inventory: 120000 divided by 100000 equals 1.20.

  1. 1.20
  2. 1.50
  3. 0.80
  4. 2.00
9 Net income is 90000 and average equity is 600000. ROE is:
Answer: 15 percent

ROE equals net income divided by average equity, or 90000 over 600000.

  1. 15 percent
  2. 6.7 percent
  3. 9 percent
  4. 20 percent
10 EBIT is 200000 and interest expense is 50000. Times interest earned is:
Answer: 4.0 times

Times interest earned equals EBIT divided by interest expense.

  1. 4.0 times
  2. 2.5 times
  3. 5.0 times
  4. 0.25 times
11 A portfolio is 70 percent in Asset A with 8 percent return and 30 percent in Asset B with 3 percent return. Expected return is:
Answer: 6.5 percent

Weighted return equals 0.7 times 8 percent plus 0.3 times 3 percent.

  1. 6.5 percent
  2. 5.5 percent
  3. 8.0 percent
  4. 3.5 percent
12 A two-stock portfolio has weights 50 percent each, standard deviations 20 percent and 10 percent, and correlation 0. The portfolio standard deviation is closest to:
Answer: 11.2 percent

Variance equals 0.5 squared times 0.2 squared plus 0.5 squared times 0.1 squared, giving standard deviation about 11.2 percent.

  1. 11.2 percent
  2. 15.0 percent
  3. 7.5 percent
  4. 30.0 percent
13 A portfolio earns 12 percent, risk-free rate is 4 percent, and standard deviation is 16 percent. Sharpe ratio is:
Answer: 0.50

Sharpe ratio equals excess return of 8 percent divided by 16 percent.

  1. 0.50
  2. 0.75
  3. 1.00
  4. 0.25
14 A 1000 par bond priced at 950 pays a 60 annual coupon. Current yield is closest to:
Answer: 6.32 percent

Current yield equals annual coupon divided by current price, 60 over 950.

  1. 6.32 percent
  2. 6.00 percent
  3. 5.70 percent
  4. 9.50 percent
15 A stock pays a 2.50 dividend next year, required return is 9 percent, and growth is 4 percent. Gordon value is:
Answer: 50

Value equals D1 divided by r minus g, or 2.50 divided by 0.05.

  1. 50
  2. 27.78
  3. 62.50
  4. 31.25
16 A firm has assets of 1000000 and liabilities of 650000. Equity is:
Answer: 350000

Equity equals assets minus liabilities.

  1. 350000
  2. 650000
  3. 1000000
  4. 1650000
17 Sales are 800000 and gross profit is 320000. Gross margin is:
Answer: 40 percent

Gross margin equals gross profit divided by sales.

  1. 40 percent
  2. 60 percent
  3. 32 percent
  4. 25 percent
18 A machine costs 75000 and saves 22000 cash per year. Simple payback period is closest to:
Answer: 3.41 years

Payback equals initial cost divided by annual savings.

  1. 3.41 years
  2. 2.93 years
  3. 4.00 years
  4. 1.71 years
19 A project has cash flows minus 1000, plus 600, plus 600. The IRR is closest to:
Answer: 13 percent

Solving 1000 equals 600 divided by 1+r plus 600 divided by 1+r squared gives about 13 percent.

  1. 13 percent
  2. 8 percent
  3. 20 percent
  4. 0 percent
20 If nominal return is 9 percent and inflation is 4 percent, approximate real return is:
Answer: 5 percent

Approximate real return equals nominal return minus inflation.

  1. 5 percent
  2. 13 percent
  3. 4 percent
  4. 9 percent
21 A loan of 10000 charges 8 percent annual simple interest for 9 months. Interest is:
Answer: 600

Simple interest equals principal times rate times time, 10000 times 0.08 times 0.75.

  1. 600
  2. 800
  3. 720
  4. 450
22 You deposit 200 per month for 12 months with no interest. Total contribution is:
Answer: 2400

Total contribution equals 200 times 12.

  1. 2400
  2. 1200
  3. 2200
  4. 2600
23 A stock bought at 40 is sold at 46 and paid a 2 dividend. Holding period return is:
Answer: 20 percent

Return equals price gain plus dividend divided by beginning price, or 8 over 40.

  1. 20 percent
  2. 15 percent
  3. 5 percent
  4. 12.5 percent
24 A call option has strike 50 and stock price at expiration is 58. Intrinsic value is:
Answer: 8

Call intrinsic value equals max stock price minus strike, zero.

  1. 8
  2. 0
  3. 50
  4. 58
25 A put option has strike 50 and stock price at expiration is 42. Intrinsic value is:
Answer: 8

Put intrinsic value equals max strike minus stock price, zero.

  1. 8
  2. 0
  3. 42
  4. 50
26 An option costs 3 and expires with intrinsic value of 8. Profit per option share before fees is:
Answer: 5

Profit equals payoff minus premium.

  1. 5
  2. 8
  3. 3
  4. 11
27 A firm has debt of 400000 and equity of 600000. Debt-to-equity ratio is:
Answer: 0.67

Debt-to-equity equals debt divided by equity.

  1. 0.67
  2. 1.50
  3. 0.40
  4. 2.50
28 Accounts receivable are 100000 and annual credit sales are 730000. Days sales outstanding is closest to:
Answer: 50 days

DSO equals receivables divided by daily sales. 100000 divided by 2000 is 50 days.

  1. 50 days
  2. 36 days
  3. 73 days
  4. 100 days
29 COGS is 600000 and average inventory is 100000. Inventory turnover is:
Answer: 6 times

Inventory turnover equals cost of goods sold divided by average inventory.

  1. 6 times
  2. 0.17 times
  3. 60 times
  4. 1.67 times
30 Operating cash flow is 180000 and capital expenditures are 70000. Free cash flow before financing is:
Answer: 110000

Free cash flow here equals operating cash flow minus capital expenditures.

  1. 110000
  2. 250000
  3. 70000
  4. 180000
31 A company pays 30000 dividends from 100000 net income. Payout ratio is:
Answer: 30 percent

Payout ratio equals dividends divided by net income.

  1. 30 percent
  2. 70 percent
  3. 3 percent
  4. 130 percent
32 If retention ratio is 60 percent and ROE is 15 percent, sustainable growth rate is approximately:
Answer: 9 percent

Sustainable growth is often approximated as ROE times retention ratio.

  1. 9 percent
  2. 25 percent
  3. 6 percent
  4. 15 percent
33 A firm issues debt at 8 percent with a 30 percent tax rate. After-tax cost of debt is:
Answer: 5.6 percent

After-tax cost of debt equals pre-tax cost times one minus tax rate.

  1. 5.6 percent
  2. 8.0 percent
  3. 2.4 percent
  4. 11.4 percent
34 Preferred stock pays a 6 annual dividend and sells for 75. Cost of preferred equity is:
Answer: 8 percent

Cost of preferred equals preferred dividend divided by market price.

  1. 8 percent
  2. 6 percent
  3. 12.5 percent
  4. 4.5 percent
35 A company has EBIT of 150000, tax rate 30 percent, and invested capital 700000. NOPAT divided by invested capital is closest to:
Answer: 15 percent

NOPAT is 150000 times 0.70, or 105000. ROIC equals 105000 over 700000.

  1. 15 percent
  2. 21.4 percent
  3. 10.5 percent
  4. 30 percent
36 If price is 30 and earnings per share are 2.50, P/E ratio is:
Answer: 12 times

P/E equals price per share divided by earnings per share.

  1. 12 times
  2. 7.5 times
  3. 30 times
  4. 2.5 times
37 If enterprise value is 5000000 and EBITDA is 1000000, EV/EBITDA is:
Answer: 5.0 times

EV/EBITDA equals enterprise value divided by EBITDA.

  1. 5.0 times
  2. 0.2 times
  3. 6.0 times
  4. 4.0 times
38 A company has cash 200000, debt 900000, and equity value 2500000. Enterprise value is:
Answer: 3200000

Enterprise value equals equity value plus debt minus cash.

  1. 3200000
  2. 3400000
  3. 1800000
  4. 2700000
39 A project has expected NPV 120000 in base case, minus 50000 in downside, and 250000 in upside. With probabilities 50 percent, 25 percent, and 25 percent, expected NPV is:
Answer: 110000

Expected NPV equals 0.5 times 120000 plus 0.25 times minus 50000 plus 0.25 times 250000.

  1. 110000
  2. 120000
  3. 80000
  4. 160000
40 If fixed costs are 100000, price per unit is 50, and variable cost per unit is 30, break-even units are:
Answer: 5000

Break-even units equal fixed costs divided by contribution margin per unit.

  1. 5000
  2. 3333
  3. 2000
  4. 10000
41 Degree of operating leverage at a sales level equals contribution margin 300000 divided by EBIT 100000. DOL is:
Answer: 3.0

DOL equals contribution margin divided by operating profit.

  1. 3.0
  2. 0.33
  3. 2.0
  4. 4.0
42 A 2-year investment grows from 10000 to 12100. Annual compound return is:
Answer: 10 percent

12100 equals 10000 times 1.10 squared.

  1. 10 percent
  2. 21 percent
  3. 12.1 percent
  4. 5 percent
43 You need 50000 in 5 years and can earn 5 percent annually. Present value needed is closest to:
Answer: 39176

PV equals 50000 divided by 1.05 to the fifth.

  1. 39176
  2. 40000
  3. 47619
  4. 52500
44 A 4-year annuity pays 1000 per year at 8 percent. Present value is closest to:
Answer: 3312

PV annuity factor at 8 percent for 4 years is about 3.312.

  1. 3312
  2. 4000
  3. 2900
  4. 3600
45 A perpetuity pays 500 annually and required return is 10 percent. Value is:
Answer: 5000

Perpetuity value equals cash flow divided by required return.

  1. 5000
  2. 500
  3. 5500
  4. 10000
46 A growing perpetuity pays 100 next year, required return is 9 percent, and growth is 3 percent. Value is:
Answer: 1667

Value equals 100 divided by 0.09 minus 0.03.

  1. 1667
  2. 1111
  3. 3333
  4. 1200
47 A bond has modified duration 6. If yields rise by 0.50 percent, approximate price change is:
Answer: minus 3 percent

Approximate price change equals negative duration times yield change.

  1. minus 3 percent
  2. plus 3 percent
  3. minus 0.5 percent
  4. plus 6 percent
48 A 1000 face value T-bill is bought for 970 and matures in one year. Return is closest to:
Answer: 3.09 percent

Return equals 30 profit divided by 970 purchase price.

  1. 3.09 percent
  2. 3.00 percent
  3. 30.0 percent
  4. 97.0 percent
49 Expected return outcomes are 20 percent with probability 0.3 and 5 percent with probability 0.7. Expected return is:
Answer: 9.5 percent

Expected return equals 0.3 times 20 percent plus 0.7 times 5 percent.

  1. 9.5 percent
  2. 12.5 percent
  3. 25 percent
  4. 7.5 percent
50 An asset has expected return 10 percent. Outcomes are 20 percent and 0 percent with equal probability. Standard deviation is:
Answer: 10 percent

Each outcome is 10 percentage points from the mean, so standard deviation is 10 percent.

  1. 10 percent
  2. 20 percent
  3. 5 percent
  4. 0 percent
51 A portfolio has beta 0.8, risk-free rate 3 percent, and market return 11 percent. CAPM return is:
Answer: 9.4 percent

Market risk premium is 8 percent, so return equals 3 percent plus 0.8 times 8 percent.

  1. 9.4 percent
  2. 8.8 percent
  3. 11.8 percent
  4. 6.4 percent
52 A stock has covariance with market of 0.018 and market variance of 0.012. Beta is:
Answer: 1.5

Beta equals covariance with market divided by market variance.

  1. 1.5
  2. 0.67
  3. 0.03
  4. 2.16
53 A firm has EBIT 100000, debt interest 20000, and tax rate 25 percent. Net income is:
Answer: 60000

Taxable income is 80000, tax is 20000, so net income is 60000.

  1. 60000
  2. 75000
  3. 80000
  4. 100000
54 A company has sales 1000000, EBIT margin 12 percent, and tax rate 25 percent with no interest. NOPAT is:
Answer: 90000

EBIT is 120000 and NOPAT is EBIT times one minus tax rate.

  1. 90000
  2. 120000
  3. 75000
  4. 300000
55 Depreciation is 40000, EBIT is 90000, tax rate is 30 percent, and no working capital change. Operating cash flow is:
Answer: 103000

OCF equals EBIT after tax of 63000 plus depreciation of 40000.

  1. 103000
  2. 63000
  3. 130000
  4. 40000
56 If accounts receivable rise by 25000, all else equal, free cash flow:
Answer: Decreases by 25000

An increase in receivables uses cash because revenue has not yet been collected.

  1. Decreases by 25000
  2. Increases by 25000
  3. Is unchanged
  4. Doubles
57 A company sells 10000 units at 80 each with variable cost 50 each and fixed cost 200000. EBIT is:
Answer: 100000

Contribution is 30 times 10000, or 300000. Less fixed costs gives EBIT of 100000.

  1. 100000
  2. 300000
  3. 500000
  4. 800000
58 A futures contract is marked to market from 102 to 105 on a long position with multiplier 1000. Gain is:
Answer: 3000

Gain equals price change of 3 times multiplier 1000.

  1. 3000
  2. 105000
  3. 102000
  4. 1000
59 A forward price under simple no-income carry with spot 100, annual risk-free rate 5 percent, and one year maturity is:
Answer: 105

Forward price is approximately spot grown at the risk-free rate when there is no income or storage cost.

  1. 105
  2. 100
  3. 95
  4. 110
60 EURUSD moves from 1.1000 to 1.1050 on a long EUR 100000 position. Profit in USD is:
Answer: 500

A 0.0050 USD move times 100000 euros equals 500 USD.

  1. 500
  2. 50
  3. 5000
  4. 100000
61 A bank quotes bid 1.2490 and ask 1.2510. The spread is:
Answer: 20 pips

The difference is 0.0020, or 20 pips for a four-decimal currency quote.

  1. 20 pips
  2. 2 pips
  3. 200 pips
  4. 0 pips
62 An investor buys 100 shares at 25 and sells at 28 with 50 total commissions. Net profit is:
Answer: 250

Gross gain is 300. Subtract 50 commissions for 250 net profit.

  1. 250
  2. 300
  3. 50
  4. 2800
63 A margin account has equity 6000 and position value 20000. Equity margin percentage is:
Answer: 30 percent

Margin percentage equals account equity divided by market value.

  1. 30 percent
  2. 60 percent
  3. 20 percent
  4. 3 percent
64 A portfolio falls from 100000 to 85000. The drawdown is:
Answer: 15 percent

Drawdown is loss from peak divided by peak, or 15000 over 100000.

  1. 15 percent
  2. 17.65 percent
  3. 85 percent
  4. 10 percent
65 A fund has alpha 2 percent, beta 1.1, risk-free rate 3 percent, and market premium 6 percent. Expected return using alpha plus CAPM is:
Answer: 11.6 percent

CAPM return is 9.6 percent. Adding alpha gives 11.6 percent.

  1. 11.6 percent
  2. 9.6 percent
  3. 8.6 percent
  4. 12.7 percent
66 A company has total asset turnover 1.5, profit margin 8 percent, and equity multiplier 2.0. ROE by DuPont is:
Answer: 24 percent

DuPont ROE equals margin times turnover times equity multiplier.

  1. 24 percent
  2. 12 percent
  3. 16 percent
  4. 6 percent
67 If ROA is 6 percent and equity multiplier is 2.5, ROE is:
Answer: 15 percent

ROE equals ROA times equity multiplier in the simple DuPont relation.

  1. 15 percent
  2. 8.5 percent
  3. 2.4 percent
  4. 6 percent
68 Book value of equity is 800000 and shares outstanding are 40000. Book value per share is:
Answer: 20

Book value per share equals equity divided by shares outstanding.

  1. 20
  2. 32
  3. 40
  4. 8
69 A stock price is 48 and book value per share is 20. Price-to-book ratio is:
Answer: 2.4

P/B equals market price divided by book value per share.

  1. 2.4
  2. 0.42
  3. 20
  4. 48
70 A company has sales 900000 and net income 72000. Net profit margin is:
Answer: 8 percent

Net margin equals net income divided by sales.

  1. 8 percent
  2. 12.5 percent
  3. 72 percent
  4. 9 percent
71 A bond has coupon 4 percent and yield 6 percent. It will generally trade:
Answer: Below par

A coupon below market yield requires a discount price.

  1. Below par
  2. At par
  3. Above par
  4. At book value only
72 A bond has coupon 8 percent and yield 5 percent. It will generally trade:
Answer: Above par

A coupon above market yield usually makes the bond worth more than par.

  1. Above par
  2. Below par
  3. At zero
  4. At par only
73 A company has fixed assets 700000, current assets 300000, current liabilities 180000, and long-term debt 420000. Equity is:
Answer: 400000

Total assets are 1000000 and total liabilities are 600000, so equity is 400000.

  1. 400000
  2. 580000
  3. 600000
  4. 120000
74 A firm increases price from 100 to 110 and quantity sold falls from 1000 to 920. Revenue changes by:
Answer: Increases by 1200

Old revenue is 100000. New revenue is 110 times 920, or 101200.

  1. Increases by 1200
  2. Falls by 8000
  3. Unchanged
  4. Increases by 10000
75 A project's profitability index is calculated as PV of future inflows 125000 divided by initial investment 100000. PI is:
Answer: 1.25

Profitability index equals present value of inflows divided by initial cost.

  1. 1.25
  2. 0.80
  3. 25.0
  4. 0.25
76 If nominal GDP grows 7 percent and inflation is 3 percent, approximate real GDP growth is:
Answer: 4 percent

Approximate real growth equals nominal growth minus inflation.

  1. 4 percent
  2. 10 percent
  3. 3 percent
  4. 7 percent
77 A firm has expected EBIT 500000 and standard deviation of EBIT 100000. Coefficient of variation is:
Answer: 0.20

Coefficient of variation equals standard deviation divided by expected value.

  1. 0.20
  2. 5.00
  3. 0.50
  4. 1.00
78 A receivable of 10000 due in 60 days is discounted at an annual simple rate of 9 percent. Discount is closest to:
Answer: 150

Using a 360-day year, discount is 10000 times 9 percent times 60 over 360.

  1. 150
  2. 900
  3. 600
  4. 90
79 A company needs 120000 annual cash outflow coverage and wants a 3-month operating reserve. Required reserve is:
Answer: 30000

Three months is one quarter of a year, so 120000 times 3 over 12 equals 30000.

  1. 30000
  2. 10000
  3. 360000
  4. 40000
80 A stock's dividend yield is 3 percent and expected capital gain yield is 6 percent. Expected total return is:
Answer: 9 percent

Total expected return is dividend yield plus capital gain yield.

  1. 9 percent
  2. 3 percent
  3. 6 percent
  4. 18 percent
81 A firm pays 4 dividend per share and earnings per share are 10. Retention ratio is:
Answer: 60 percent

Payout ratio is 40 percent, so retention ratio is 60 percent.

  1. 60 percent
  2. 40 percent
  3. 4 percent
  4. 10 percent
82 A company's market cap is 12000000 and net income is 1000000. P/E ratio is:
Answer: 12 times

P/E can be calculated as equity market value divided by earnings.

  1. 12 times
  2. 0.083 times
  3. 10 times
  4. 120 times

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