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# Exercise from website - CHAPTER 6 Discounted Cash Flow...

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CHAPTER 6 Discounted Cash Flow Valuation I. DEFINITIONS ANNUITY a 1. An annuity stream of cash flow payments is a set of: a. level cash flows occurring each time period for a fixed length of time. b. level cash flows occurring each time period forever. c. increasing cash flows occurring each time period for a fixed length of time. d. increasing cash flows occurring each time period forever. e. arbitrary cash flows occurring each time period for no more than 10 years. PRESENT VALUE FACTOR FOR ANNUITIES b 2. The present value factor for annuities is calculated as: a. (1 + present value factor) ÷ r. b. (1 – present value factor) ÷ r. c. present value factor + (1 ÷ r). d. (present value factor × r) + (1 ÷ r). e. r × (1 + present value factor). FUTURE VALUE FACTOR FOR ANNUITIES d 3. The future value factor for annuities is calculated as the: a. future value factor + r. b. (1 ÷ r) + (future value factor × r). c. (1 ÷ r) + future value factor. d. (future value factor – 1) ÷ r. e. (future value factor + 1) ÷ r. ANNUITIES DUE e 4. Annuities where the payments occur at the end of each time period are called _____ , whereas _____ refer to annuity streams with payments occurring at the beginning of each time period. a. ordinary annuities; early annuities b. late annuities; straight annuities c. straight annuities; late annuities d. annuities due; ordinary annuities e. ordinary annuities; annuities due PERPETUITY c 5. An annuity stream where the payments occur forever is called a(n): a. annuity due. b. indemnity. c. perpetuity. d. amortized cash flow stream. e. amortization table.

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STATED INTEREST RATES a 6. The interest rate expressed in terms of the interest payment made each period is called the _____ rate. a. stated interest b. compound interest c. effective annual d. periodic interest e. daily interest EFFECTIVE ANNUAL RATE c 7. The interest rate expressed as if it were compounded once per year is called the _____ rate. a. stated interest b. compound interest c. effective annual d. periodic interest e. daily interest ANNUAL PERCENTAGE RATE b 8. The interest rate charged per period multiplied by the number of periods per year is called the _____ rate. a. effective annual b. annual percentage c. periodic interest d. compound interest e. daily interest PURE DISCOUNT LOAN d 9. A loan where the borrower receives money today and repays a single lump sum at some time in the future is called a(n) _____ loan. a. amortized b. continuous c. balloon d. pure discount e. interest-only INTEREST-ONLY LOAN e 10. A loan where the borrower pays interest each period and repays the entire principal of the loan at some point in the future is called a(n) _____ loan. a. amortized
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## This note was uploaded on 03/18/2011 for the course FIN 5170 taught by Professor Tm during the Spring '11 term at North Texas.

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Exercise from website - CHAPTER 6 Discounted Cash Flow...

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