1. A company has a current ratio of 1.5 and a quick ratio of

0.8. What is its inventory turnover ratio?

a) 0.53

b) 1.88

c) 2.35

d) 3.75

Answer: b) 1.88

Rationale: The inventory turnover ratio is calculated as

(current ratio - quick ratio) / quick ratio. Therefore, (1.5 -

0.8) / 0.8 = 1.88.

2. A bond has a face value of $1000, a coupon rate of 8%,

and a maturity of 10 years. What is its yield to maturity if it

is currently selling for $950?

a) 8.72%

b) 8.42%

c) 8.16%

d) 7.89%

Answer: b) 8.42%

Rationale: The yield to maturity is the discount rate that

equates the present value of the bond's cash flows to its

price. Using a financial calculator or spreadsheet, we can

find that the yield to maturity is 8.42%.

3. A project has an initial outlay of $5000, a cash inflow of

$2000 per year for four years, and a required rate of return

of 12%. What is its net present value?

a) $1136.35

b) $1289.24