Filters
Question type
Study Flashcards

Your child's orthodontist offers you two alternative payment plans.The first plan requires a $4,000 immediate up-front payment.The second plan requires you to make monthly payments of $137.41,payable at the end of each month for 3 years.What nominal annual interest rate is built into the monthly payment plan?


A) 12.31%
B) 12.96%
C) 13.64%
D) 14.36%
E) 15.08%

F) A) and B)
G) A) and C)

Correct Answer

verifed

verified

All other things held constant,the present value of a given annual annuity decreases as the number of periods per year increases.

A) True
B) False

Correct Answer

verifed

verified

Suppose a State of California bond will pay $1,000 eight years from now.If the going interest rate on these 8-year bonds is 5.5%,how much is the bond worth today?


A) $651.60
B) $684.18
C) $718.39
D) $754.31
E) $792.02

F) B) and C)
G) A) and B)

Correct Answer

verifed

verified

You have a chance to buy an annuity that pays $5,000 at the beginning of each year for 5 years.You could earn 4.5% on your money in other investments with equal risk.What is the most you should pay for the annuity?


A) $20,701
B) $21,791
C) $22,938
D) $24,085
E) $25,289

F) D) and E)
G) A) and B)

Correct Answer

verifed

verified

Which of the following statements is CORRECT?


A) If you have a series of cash flows, each of which is positive, you can solve for I, where the solution value of I causes the PV of the cash flows to equal the cash flow at Time 0.
B) If you have a series of cash flows, and CF0 is negative but each of the following CFs is positive, you can solve for I, but only if the sum of the undiscounted cash flows exceeds the cost.
C) To solve for I, one must identify the value of I that causes the PV of the positive CFs to equal the absolute value of the FV of the negative CFs. It is impossible to find the value of I without a computer or financial calculator.
D) If you solve for I and get a negative number, then you must have made a mistake.
E) If CF0 is positive and all the other CFs are negative, then you can still solve for I.

F) A) and C)
G) A) and E)

Correct Answer

verifed

verified

Charter Bank pays a 4.50% nominal rate on deposits,with monthly compounding.What effective annual rate (EFF%) does the bank pay?


A) 3.72%
B) 4.13%
C) 4.59%
D) 5.05%
E) 5.56%

F) B) and D)
G) B) and C)

Correct Answer

verifed

verified

If a bank compounds savings accounts quarterly,the effective annual rate will exceed the nominal rate.

A) True
B) False

Correct Answer

verifed

verified

As a result of compounding,the effective annual rate on a bank deposit (or a loan)is always equal to or greater than the nominal rate on the deposit (or loan).

A) True
B) False

Correct Answer

verifed

verified

Which of the following statements is CORRECT?


A) A time line is not meaningful unless all cash flows occur annually.
B) Time lines are useful for visualizing complex problems prior to doing actual calculations.
C) Time lines cannot be constructed in situations where some of the cash flows occur annually but others occur quarterly.
D) Time lines cannot be constructed for annuities where the payments occur at the beginning of the periods.
E) Some of the cash flows shown on a time line can be in the form of annuity payments, but none can be uneven amounts.

F) A) and B)
G) B) and D)

Correct Answer

verifed

verified

Disregarding risk,if money has time value,it is impossible for the future value of a given sum to exceed its present value.

A) True
B) False

Correct Answer

verifed

verified

What is the PV of an ordinary annuity with 5 payments of $4,700 if the appropriate interest rate is 4.5%?


A) $16,806
B) $17,690
C) $18,621
D) $19,601
E) $20,633

F) A) and E)
G) C) and D)

Correct Answer

verifed

verified

The payment made each period on an amortized loan is constant,and it consists of some interest and some principal.The closer we are to the end of the loan's life,the greater the percentage of the payment that will be a repayment of principal.

A) True
B) False

Correct Answer

verifed

verified

Suppose Randy Jones plans to invest $1,000.He can earn an effective annual rate of 5% on Security A,while Security B has an effective annual rate of 12%.After 11 years,the compounded value of Security B should be somewhat less than twice the compounded value of Security A.(Ignore risk,and assume that compounding occurs annually.)

A) True
B) False

Correct Answer

verifed

verified

Suppose you have $1,500 and plan to purchase a 5-year certificate of deposit (CD) that pays 3.5% interest,compounded annually.How much will you have when the CD matures?


A) $1,781.53
B) $1,870.61
C) $1,964.14
D) $2,062.34
E) $2,165.46

F) A) and B)
G) A) and C)

Correct Answer

verifed

verified

​What's the rate of return you would earn if you paid $950 for a perpetuity that pays $85 per year?


A) ​8.95%
B) ​9.39%
C) ​9.86%
D) ​10.36%
E) ​10.88%

F) A) and D)
G) A) and C)

Correct Answer

verifed

verified

Suppose Community Bank offers to lend you $10,000 for one year at a nominal annual rate of 8.00%,but you must make interest payments at the end of each quarter and then pay off the $10,000 principal amount at the end of the year.What is the effective annual rate on the loan?


A) 8.24%
B) 8.45%
C) 8.66%
D) 8.88%
E) 9.10%

F) B) and C)
G) A) and C)

Correct Answer

verifed

verified

Suppose a State of New York bond will pay $1,000 ten years from now.If the going interest rate on these 10-year bonds is 5.5%,how much is the bond worth today?


A) $585.43
B) $614.70
C) $645.44
D) $677.71
E) $711.59

F) B) and E)
G) A) and B)

Correct Answer

verifed

verified

Suppose Sally Smith plans to invest $1,000.She can earn an effective annual rate of 5% on Security A,while Security B has an effective annual rate of 12%.After 11 years,the compounded value of Security B should be more than twice the compounded value of Security A.(Ignore risk,and assume that compounding occurs annually.)

A) True
B) False

Correct Answer

verifed

verified

Time lines can be constructed for annuities where the payments occur at either the beginning or the end of the periods.

A) True
B) False

Correct Answer

verifed

verified

What's the present value of $1,525 discounted back 5 years if the appropriate interest rate is 6%,compounded monthly?


A) $ 969
B) $1,020
C) $1,074
D) $1,131
E) $1,187

F) C) and E)
G) B) and E)

Correct Answer

verifed

verified

Showing 61 - 80 of 163

Related Exams

Exam 1

An Overview of Financial Management

65 Questions

Exam 2

Financial Markets and Institutions

33 Questions

Exam 3

Financial Statements, cash Flow, and Taxes

130 Questions

Exam 4

Analysis of Financial Statements

133 Questions

Exam 6

Interest Rates

82 Questions

Exam 7

Bonds and Their Valuation

92 Questions

Exam 8

Risk and Rates of Return

146 Questions

Exam 9

Stocks and Their Valuation

89 Questions

Exam 10

The Cost of Capital

94 Questions

Exam 11

The Basics of Capital Budgeting

108 Questions

Exam 12

Cash Flow Estimation and Risk Analysis

81 Questions

Exam 13

Real Options and Other Topics in Capital Budgeting

41 Questions

Exam 14

Capital Structure and Leverage

88 Questions

Exam 15

Distributions to Shareholders: Dividends and Share Repurchases

75 Questions

Exam 16

Working Capital Management

126 Questions

Exam 17

Financial Planning and Forecasting

39 Questions

Exam 18

Derivatives and Risk Management

35 Questions

Exam 19

Multinational Financial Management

50 Questions

Exam 20

Hybrid Financing: Preferred Stock, leasing, warrants, and Convertibles

60 Questions

Exam 21

Mergers and Acquisitions

39 Questions

Exam 22

Continuous Compounding and Discounting

8 Questions

Exam 23

Zero Coupon Bonds

18 Questions

Exam 24

Bankruptcy and Reorganization

4 Questions

Exam 25

Calculating Beta Coefficients

8 Questions

Exam 26

Using the Capm to Estimate the Risk-Adjusted Cost of Capital

5 Questions

Exam 27

Techniques for Measuring Beta Risk

3 Questions

Exam 28

Degree of Leverage

23 Questions

Show Answer