chap006 - Chapter 006 Discounted Cash Flow Valuation...

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Chapter 006 Discounted Cash Flow Valuation Multiple Choice Questions 1. An annuity is a(n): a. level stream of perpetual cash flows. B . level stream of cash flows occurring for a fixed period of time. c. increasing stream of perpetual cash flows. d. increasing stream of cash flows occurring for a fixed period of time. e. decreasing stream of cash flows occurring for a fixed period of time. SECTION: 6.2 TOPIC: ANNUITY TYPE: DEFINITIONS 2. Which one of the following is the annuity present value factor? 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) SECTION: 6.2 TOPIC: PRESENT VALUE FACTOR FOR ANNUITIES TYPE: DEFINITIONS 3. What is a consol? a. a type of annuity issued by an insurance company B . a name used in Canada for a perpetuity c. an annuity stream of payments received as an inheritance d. a decreasing stream of perpetual payments e. an increasing stream of perpetual payments SECTION: 6.2 TOPIC: CONSOL TYPE: DEFINITIONS 7-1
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Chapter 006 Discounted Cash Flow Valuation 4. How is an annuity due defined? a. a stream of cash flows occurring for less than one year b. an annuity stream of payments that are disbursed rather than received c. an annuity stream of payments that are received rather than disbursed d. a set of equal cash flows occurring at the end of each period E . a set of equal cash flows occurring at the beginning of each period SECTION: 6.2 TOPIC: ANNUITIES DUE TYPE: DEFINITIONS 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. ordinary annuity. SECTION: 6.2 TOPIC: PERPETUITY TYPE: DEFINITIONS 6. What is the interest rate that is expressed in terms of the interest payment made each period called? A . stated interest b. compound interest c. effective annual d. periodic interest e. daily interest SECTION: 6.3 TOPIC: STATED INTEREST RATES TYPE: DEFINITIONS 7-2
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Chapter 006 Discounted Cash Flow Valuation 7. What is the interest rate that is expressed as if it were compounded once per year called? a. stated interest b. compound interest C . effective annual d. periodic interest e. daily interest SECTION: 6.3 TOPIC: EFFECTIVE ANNUAL RATE TYPE: DEFINITIONS 8. What is the interest rate charged per period multiplied by the number of periods per year called? a. effective annual B . annual percentage c. periodic interest d. compound interest e. daily interest SECTION: 6.3 TOPIC: ANNUAL PERCENTAGE RATE TYPE: DEFINITIONS 9. A loan where the borrower receives money today and repays a single lump sum on a future date is called a(n) _____ loan. a. amortized b. continuous c. balloon D . pure discount e. interest-only SECTION: 6.4 TOPIC: PURE DISCOUNT LOAN TYPE: DEFINITIONS 7-3
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Chapter 006 Discounted Cash Flow Valuation 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 03/23/2011 for the course ECON 202098 taught by Professor Sameer during the Spring '11 term at University of Jordan.

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chap006 - Chapter 006 Discounted Cash Flow Valuation...

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