Comm 370 Exam
Commerce 370 – Midterm Exam – Sep-Dec-2011 – Solutions
Name: ______________________________________________________ Student ID: __________________________________________________
Section (circle one): M-W 2:30pm ; Tu-Th 11:00am ; Tu-Th 2:00pm
Write your name and student ID at the top of this front page, and circle your section. Check the number of pages in the exam. You should have X pages. This is a 100-point exam with 7 questions. You have 2 hours to complete the exam. Carefully administer your time! No books or notes are permitted. You may use a non-programmable calculator. Only exams written in ink will be eligible for formal re-grading. Please answer the questions in the space provided after the question. Write your answers clearly and legibly. Show all details of your work. A formula sheet is provided in the last page, but be aware that the formulas given may or may not be useful to solve the questions in this exam. Do not use formulas without carefully thinking whether they are useful in a particular problem. GOOD LUCK!
______________________________________________________________________________ Instructor use only:
Problem 1 ( 8 points): Problem 2 (18 points): Problem 3 (18 points): Problem 4 (18 points): Problem 5 (15 points): Problem 6 (13 points): Problem 7 (10 points): Total (of 100 points):
1
Question 1 (8 points) Answer the following two independent multiple choice questions. Clearly circle your answer. a) (4 points) A firm’s customers are cash constrained and can borrow from the bank at 18% per year. Other things equal (e.g., assuming no changes in sales), if the firm changes the terms of credit it offers to its customers from “1/15 net 40” to “2/10 net 50”, then the firm’s Accounts Receivable Period will _______________. A. decrease B. increase C. either increase or decrease D. stay the same E. none of the above Answer: A. With “1/15 net 40”, EAR = (1 + 1/99)365/25 – 1 = 15.8% < 18%. So, before the change in credit policy, customers
Name: ______________________________________________________ Student ID: __________________________________________________
Section (circle one): M-W 2:30pm ; Tu-Th 11:00am ; Tu-Th 2:00pm
Write your name and student ID at the top of this front page, and circle your section. Check the number of pages in the exam. You should have X pages. This is a 100-point exam with 7 questions. You have 2 hours to complete the exam. Carefully administer your time! No books or notes are permitted. You may use a non-programmable calculator. Only exams written in ink will be eligible for formal re-grading. Please answer the questions in the space provided after the question. Write your answers clearly and legibly. Show all details of your work. A formula sheet is provided in the last page, but be aware that the formulas given may or may not be useful to solve the questions in this exam. Do not use formulas without carefully thinking whether they are useful in a particular problem. GOOD LUCK!
______________________________________________________________________________ Instructor use only:
Problem 1 ( 8 points): Problem 2 (18 points): Problem 3 (18 points): Problem 4 (18 points): Problem 5 (15 points): Problem 6 (13 points): Problem 7 (10 points): Total (of 100 points):
1
Question 1 (8 points) Answer the following two independent multiple choice questions. Clearly circle your answer. a) (4 points) A firm’s customers are cash constrained and can borrow from the bank at 18% per year. Other things equal (e.g., assuming no changes in sales), if the firm changes the terms of credit it offers to its customers from “1/15 net 40” to “2/10 net 50”, then the firm’s Accounts Receivable Period will _______________. A. decrease B. increase C. either increase or decrease D. stay the same E. none of the above Answer: A. With “1/15 net 40”, EAR = (1 + 1/99)365/25 – 1 = 15.8% < 18%. So, before the change in credit policy, customers