Reference no: EM132777216

Questions -

Q1. You get a twenty-year amortized loan of $100,000 with a 5% annual interest rate. What are the annual payments?

a. $8,718

b. $37,689

c. $4,762

d. $8,024

Q2. To maintain shareholders, a company pays some dividend every quarter, regardless of earnings. This is an example of:

1. clientele dividend theory

2. residual dividend theory

3. signaling dividend theory

4. bird-in-the-hand dividend theory

Q3. As a gift from your parents, you just received $50,000 for your education. You can earn an annual rate of 8% on your investments. How much can you withdraw each year (end of year) for the next 4 years?

a. $12,500

b. $11,096

c. $11,750

d. $15,096

Q4. The risk free rate of return is 5 percent, the market risk premium is 10 percent, and the stock of ABC has beta of 1.5. Last year, ABC earned $10 per share in earnings and 70 percent of earnings were retained by the firm - the remaining amount was paid out as dividends. Dividends are expected to grow by 2 percent. What's the intrinsic value of ABC's stock?

a. $15,6

b. $17.0

c. $6.4

d. $18.6

Q5. Which of the problems listed below is related to IRR:

a. reinvestment horizon may be inadequate

b. no relation between NPV and IRR

c. Multiple IRRs

d. a negative relationship between NPV and IRR