Interest rates are given as annual rates if semiannual

Assignment Help Finance Basics
Reference no: EM13623859

1. Interest rates are given as annual rates. If semiannual (twice a year) compounding is being used, then you would make the following adjustments:

  • Double the rate and double the number of years.
  • Double the rate and halve the number of years.
  • Halve the rate and halve the number of years.
  • Halve the rate and double the number of years.

2. $10,000 will be received exactly 10 years from today. The following statement is true:

  • If the interest rate increases, so does the present value of the $10,000.
  • If the interest rate increases, the present value of the $10,000 decreases.
  • It is worth $10,000 today.
  • It will have a present value greater than $10,000.

 

3. Suppose a zero-coupon bond is selling for $614.00 today. It promises to pay $1,000 in exactly 10 years with annual compounding. Its annual rate of return would be about ____.

  • 4%
  • 5%
  • 6%
  • 7%

4. the effective annual percentage rate may be different that the stated APR (annual percentage rate) because:

  • compounding occurs more often than once a year.
  • extra fees are added to most loans.
  • banks are allowed to hide the real cost of borrowing.
  • the APR assumes semiannual compounding.


5. If we make the assumption that a company's dividends grow at some constant rate, then we can value the stock as:

  • a growing perpetuity.
  • a growing annuity.
  • a perpetuity.
  • an annuity.

6. Common stock that pays cash dividends can be viewed as:

  • an annuity-regularly spaced payments of the same dollar amount for a fixed number of periods.
  • a perpetuity-regularly spaced payments of the same dollar amount that continue indefinitely.
  • similar to a perpetuity but with irregular spacing of the dividends.
  • similar to a perpetuity but with dividends that change amount.

7. E.I. du Pont de Nemours & Co. has an issue of $4.50 preferred stock outstanding. It is currently selling for $108. What rate of return are investors requiring?

  • 4.17%
  • 4.5%
  • 9%
  • 24%.

 

8. An ordinary annuity has its first payment ______, but an annuity due has its first payment _________.

  • at the beginning of the period; at the beginning of the period.
  • at the beginning of the period; at the end of the period.
  • at the end of the period; at the end of the period.
  • at the end of the period; at the beginning of the period.

9. Zeta Corporation just paid a $2.00 dividend. Analysts believe that Zeta Corporation's dividend will grow by 20% next year, and then settle into a constant growth regime at 5% per year into the future. If investors assign a required rate of return of 12% to Zeta's stock, what should the stock sell for today?

  • $30.00
  • $32.14
  • $34.29
  • $36.00

10. Simple interest means that:

  • the interest rate is the same every period.
  • the dollar amount of interest is the same every period.
  • interest is only paid once a year.
  • the compounding periods are annual.

Reference no: EM13623859

Questions Cloud

A small sphere of radius r1 and charge q1 is enclosed by a : a small sphere of radius r1 and charge q1 is enclosed by a spherical shell of radius r2 and charge q2. show that if q1
How have the needs for life insurance changed with the : how have the needs for life insurance changed with the increasing number of two-income households? remarried
The surface of the pool is 70 m above the surface of the : an 80 efficient pump with a power input of 15 mw is pumping water from a lake to a nearby pool at a rate of 1.6 m3s
When it is connected to an ac source with an rms output of : a particular inductor has appreciable resistance. when the inductor is connected to a 12 v battery the current
Interest rates are given as annual rates if semiannual : 1. interest rates are given as annual rates. if semiannual twice a year compounding is being used then you would make
Describe schematically the equipotential surfaces : describe schematically the equipotential surfaces corresponding toa a constant electric field in the z-directionb a
05002 m along the datum line 04999 m and 05001 m along : deformation measurements were made on a flat rock surface using 0.5000 m-long gauge lengths. the following observations
Of a random sample of 90 firms with employee stock : of a random sample of 90 firms with employee stock ownership plans 40 indicated that the primary reason for setting up
Determine the capacitance of the system and the potential : a cylindrical capacitor has two co-axial cylinders of length 15 cm and radii 1.5 cm and 1.4 cm. the outer cylinder is

Reviews

Write a Review

 

Finance Basics Questions & Answers

  Discuss the impact on local bank behavior of this change

Please discuss the impact on local bank behavior of this change and how this contributed to the financial meltdown in 2007 - 2008 and its aftermath.

  Define and discuss the concepts of risk and return

Discuss the importance of portfolio diversification and the relationship to risk and return.

  What is the value of this 20 year lease the first payment

what is the value of this 20 year lease? the first payment due one year from today is 2000 and each annual payment will

  What is the portfolios new beta

Your retirement fund consists of a $5,000 investment in each of 15 different common stocks. The portfolio beta is 1.20. Suppose you sell one of the stocks with a beta of .08 for $5,000 and use the proceeds to buy another stock whose beta is 1.6. W..

  Pizza express enterprises has a target capital structure of

pizza express enterprises has a target capital structure of 50 debt and 50 ordinary equity. the firm is considering a

  Collection process on accounts receivable

1. How can a company improve its collection process on accounts receivable. Offer multiple suggestions with explanation.

  Calculate the inventory turnover for each year

The Robinson Company had a cost of goods sold of $1,000,000 in 2011 and $1,200,000 in 2012.

  Compute the net realizable value of accounts receivable

An analysis and aging of accounts receivable of the Lucille Corporation at December 31, 2007, showed the following:

  Which alternative has the lower cost

Issuance costs are $500,000, the bond has a 9.25% annual coupon, and the bond has a 20-year life. Which alternative has the lower cost (annual percentage yield)?

  If firm decreases its reported income by amount of

pavlovich instruments inc. a maker of precision telescopes expects to report pre-tax income of 430000 this year. the

  Do you offer home work asistance for mba finance

Do you offer home work asistance for MBA finance? If yes how does it work?

  Gentlemen gym just paid it annual dividend of 3 per share

gentlemen gym just paid it annual dividend of 3 per share and and it is widely expected that the dividend will increase

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd