Question 1

0 out of 2 points The shorter the length of time between a present value and its corresponding future value, Answer Selected Answer: the lower the present value, relative to the future value.

Question 2

0 out of 2 points As the interest rate increases, the present value of an amount to be received at the end of a fixed period Answer Selected Answer: increases.

Question 3

2 out of 2 points The concept of time value of money is important to financial decision making because Answer Selected Answer: all of the above

Question 4

2 out of 2 points An annuity may be defined as Answer Selected Answer: a series of consecutive payments of equal amounts.

Question 5

2 out of 2 points

As the time period until receipt increases, the present value of an amount at a fixed interest rate Answer Selected Answer: decreases.

Question 6

2 out of 2 points As the discount rate becomes higher and higher, the present value of inflows approaches Answer Selected Answer: 0

Question 7

0 out of 2 points In determining the future value of a single amount, one measures Answer Selected Answer: the present value of periodic payments at a given interest rate.

Question 8

2 out of 2 points The higher the rate used in determining the future value of a $1 annuity, Answer Selected Answer: the greater the future value at the end of a period.

Question 9

2 out of 2 points As the compounding rate becomes lower and lower, the future value of inflows approaches Answer Selected Answer:

the present value of the inflows

Question 10

0 out of 2 points A dollar today is worth more than a dollar to be received in the future because Answer Selected Answer: inflation will reduce purchasing power of a future dollar.

Question 1
2 out of 2 points Increasing the number of periods will increase all of the following except Answer Selected Answer: the present value of $1.

Question 2

2 out of 2 points As the time period until receipt increases, the present value of an amount at a fixed interest rate Answer Selected Answer: decreases.

Question 3

2 out of 2 points Babe Ruth Jr. has agreed to play for the Cleveland Indians for $3 million per year for the next 10 years. What table would you use to calculate the value of this contract in today's dollars? Answer Selected Answer: Present value of an annuity

Question 4

2 out of 2 points An annuity may be defined as Answer Selected Answer: a series of consecutive payments of equal amounts.

Question 5

2 out of 2 points The shorter the length of time between a present value and its corresponding future value, Answer Selected Answer: the higher the present value, relative to the future value.

Question 6

2 out of 2 points What is generally the largest source of short-term credit small firms? Answer Selected Answer: Trade credit

Question 7

2 out of 2 points The higher the rate used in determining the future value of a $1 annuity, Answer Selected Answer: the greater the future value at the end of a period.

Question 8

2 out of 2 points

In determining the future value of a single amount, one measures Answer Selected Answer: the future value of an amount allowed to grow at a given interest rate.

Question 9

2 out of 2 points A dollar today is worth more than a dollar to be received in the future because Answer Selected Answer: the dollar can be invested today and earn interest.

Question 10

2 out of 2 points As the interest rate increases, the present value of an amount to be received at the end of a fixed period Answer Selected Answer: decreases.

Question 1
2 out of 2 points The cost of capital for common stock is ke=(D1/Po)+g. What are the assumptions of the model? Answer Selected Answer: All of the above are assumptions of the model.

Question 2

2 out of 2 points The return measure that an investor demands for giving up current use of funds, without adjusting for purchasing power changes or the real rate of return, is the

Answer Selected Answer: risk premium.

Question 3

2 out of 2 points The market allocates capital to companies based on Answer Selected Answer: all of the above

Question 4

2 out of 2 points Stock valuation models are dependent upon Answer Selected Answer: expected dividends, future dividend growth and an appropriate discount rate.

Question 5

2 out of 2 points The risk premium is likely to be highest for Answer Selected Answer: gold mining expedition.

Question 6

2 out of 2 points The value of a common stock is based on its Answer Selected Answer: value of future benefits to the holder.

Question 7

2 out of 2 points Preferred stock has all but which of the following characteristics? Answer Selected Answer: the same binding contractual obligation as debt

Question 8

2 out of 2 points If a company's stock price (Po) goes up, and nothing else changes, Ke(the required rate of return) should Answer Selected Answer: go down.

Question 9

2 out of 2 points Valuation of financial assets requires knowledge of Answer Selected Answer: a and b

Question 10

2 out of 2 points Will an increase in inflation have a larger impact on the price of a bond or preferred stock? Answer Selected Answer: the preferred stock.