Finance Exam 1 - FIN 331-2 Fall 2008 EXAM 1 NAME: _ 1 PART...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
FIN 331-2 – Fall 2008 – EXAM 1 1 NAME: _________________________________________________ PART I: Conceptual/Multiple Choice – 40 questions- 1/2 point each = 20 points 1. The primary operating goal of a publicly-owned firm interested in serving its stockholders should be to a. Maximize its expected total corporate income. b. Maximize its expected EPS. c. Minimize the chances of losses. d. Maximize the stock price per share over the long run, which is the stock’s intrinsic value. e. Maximize the stock price on a specific target date. 2. The value of an investment after one or more periods of time is called the: a. simple value. b. present value. c. discounted value. d. future value. e. interest on interest value. 3. The process of accumulating interest in an investment over time to earn more Interest is called: a. discounting. b. compounding. c. complexing. d. multiplying. e. indexing. 4. All else constant, the present value will __________ as the period of time decreases, given an interest rate greater than zero. a. remain constant b. decrease c. increase d. either remain constant or decrease e. either remain constant or increase 5. The relationship between the present value and the interest rate is best described as: a. direct. b. inverse. c. unrelated. d. uncorrelated. e. vertical.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
FIN 331-2 – Fall 2008 – EXAM 1 2 6. An annuity for which the cash flows occur at the beginning of each time period is called a(n): a. ordinary annuity. b. beginning annuity. c. annuity due. d. perpetuity. e. perpetuity due. 7. The effective annual rate is defined as the interest rate that is: a. compounded at regular intervals throughout the year. b. equal to a monthly rate multiplied by twelve. c. computed by multiplying the rate per period by the number of periods per year. d. expressed as if it were compounded once per year. e. compounded only once over a multi-year period. 8. You are analyzing the value of an investment by calculating the present value of its expected cash flows. Which of the following would cause the investment to look better? a. The discount rate decreases. b. The cash flows are extended over a longer period of time, but the total amount of the cash flows remains the same. c. The discount rate increases. d. The riskiness of the project’s cash flows increases. e. The total amount of cash flows remains the same, but more of the cash flows are received in the later years and less are received in the earlier years. 9. Which of the following statements regarding a 30-year, $100,000 mortgage with a nominal interest rate of 10%, compounded monthly, is NOT CORRECT? a. The monthly payments will decline over time. b. The proportion of the monthly payment that represents interest will be lower for the last payment than for the first payment on the loan. c.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 07/12/2009 for the course FINANCE 331-2 taught by Professor David during the Spring '09 term at Clayton.

Page1 / 25

Finance Exam 1 - FIN 331-2 Fall 2008 EXAM 1 NAME: _ 1 PART...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online