bushels of corn

/in , , /by

A farmer currently holds 5000 bushels of corn. The local mill is offering a price of $2.18 a bushel. Currently, a 3  month futures contract is trading at $2.24. The farmer is considering selling to the local mill or holding the corn

in inventory and selling a futures contract. The farmer can store and insure the corn at a total cost of 1 cent per

bushel per month. Payment for this cost is due up front, at date 0. Interest rates are 10%, continuously

compounded.

a. Which alternative should the farmer pursue? Why?  b. Are there any additional factors that need to be considered?

 forward price

/in , , /by

A stock pays a $1 dividend in 3 months’ time, and a second $1 in 6 months. The stock price is $40. The risk free  rate is 10% per year (continuously compounded).

a. Compute the fair forward price of a contract that requires delivery in 7 months’ time.   b. Four months later, the stock price is $30. What is the new forward price and what is the value of the

long position in the original forward contract?

compound formula

/in , , /by

 When considering a “lump sum” savings plan, in the compound formula the value of net represents

a) the total amount of money saved.

b) the total number of compoundings.

c) the total number of years of the savings plan.

d) the number of compoundings per year.

decimal form

/in , , , /by

Convert 0.04% to decimal form a) 4% b) 0.04 c) 0.004 d) 0.0004

consumer math

/in , , /by

 When doing calculations for consumer math (finance), a timespan of 500 weeks converted to years would be

a) 9.59 years b) 41.67 years c) 10.00 years d) 9.62 years

board of directors

/in , , /by

All of the following statements about a corporation’s board of directors are true, except:

It is a group of individuals elected by the shareholders.

It hires managers to run the company and employees to work for the company.

It is a group of individuals who represent the shareholders’ interests.

It delegates the responsibility for the day to day management of the corporation to top executives.

TVX Manufacturing purchases

/in , , /by

TVX Manufacturing purchases the patent for a tool from another firm for $50,000. The estimated useful life of the patent is 10 years. The cost of the patent should be __________ for the next 10 years.

depreciated

credited

depleted

amortized

t-account

/in , /by

Which type of transaction is reflected on the right side of a t-account?

Credit accounts

Debit accounts

Chart of accounts

General ledger accounts

accounting cycle

/in , /by

In the accounting cycle, the fourth step is __________.

preparing the unadjusted trial balance

posting general journal entries to the general ledger

preparing an adjusted trial balance

preparing financial statements

purchase of assets

/in , , /by

Which of the following is the process for recording the purchase of assets and then gradually transferring their cost to expense?

Depreciation

Matching principle

Prepaid expenses

Immediate recognition