Quiz - Sept 2006 - Solutions

Quiz - Sept 2006 - Solutions - Finance 100 Corporate...

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Finance 100: Corporate Finance Professor Michael R. Roberts Quiz 1 September 25, 2005 Name: Section: Question Maximum Student Score 1 30 2 30 3 40 Total 100 Instructions: Please read each question carefully Formula sheets are attached to the back of the quiz You must show all work to receive credit & all numbers must be precise to the second decimal place. Good luck 1
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1. (30 Points) Please circle one answer. (a) (5 Points) Annuities make the same periodic payment, which is equal to the total principal divided by the number of periods. i. True ii. False iii. Uncertain Solution: ii. Each payment consists of interest and principal, the former of which decreases with each payment while the latter increases with each payment. (b) (5 Points) Individual investors are not allowed to invest in “junk” bonds. i. True ii. False iii. Uncertain Solution: ii. (c) (5 Points) Treasury strips are: i. semi-annual coupon paying bonds ii. zero coupon bonds iii. self-amortizing bonds iv. a new type of tortilla chip Solution: ii.
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