1. Sixty years ago, your grandparents opened two savings accounts and deposited
ID: 2624922 • Letter: 1
Question
1.Sixty years ago, your grandparents opened two savings accounts and deposited $200 in each account. The first account was with City Bank at 3 percent, compounded annually. The second account was with Country Bank at 3.5 percent, compounded annually. Which one of the following statements is true concerning these accounts?
A. The City Bank account is currently worth $1,201.54.
B. The City Bank account has earned $211.19 more in interest than the Country Bank account.
C. The Country Bank account is currently worth $1,526.08.
D. The Country Bank account has paid $367.48 more in interest than the City Bank account.
E. The Country Bank account has paid $397.30 more in interest than the City Bank account.
2. A firm has inventory of $11,400, accounts payable of $9,800, cash of $850, net fixed assets of $12,150, long-term debt of $9,500, accounts receivable of $6,600, and total equity of $11,700. What is the common-size percentage for the net fixed assets?
3. Which one of the following is the maximum growth rate that a firm can achieve without any additional external financing of any kind?
A. Du Pont rate
B. External growth rate
C. Sustainable growth rate
D. Internal growth rate
E. Cash flow rate
Please explain your answer of how you calculate or how it works, thanks for your help :)
Explanation / Answer
A1) citi bank account is worth 200*(1.03)^60 = $1178.32
country bank account is worth 200*(1.035)^60 = $1575.618
Hence, E. The Country Bank account has paid $397.30 more in interest than the City Bank account. = ANswer
A2) common-size % = percentage of Accounts Receivable of Total assets = $6600/(6600+850+12150+1140) = 31.8226% = ANswer
A3) C. Sustainable growth rate by definition
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