Exam 2 - FI 3300 - CORPORATION FINANCE Summer NAME (please...

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FI 3300 - CORPORATION FINANCE Summer NAME (please print) _________________________________________________________ DIRECTIONS: Staple worked out solutions to problems 11 through 30 to this sheet. Turn in this sheet and your attached worked out solutions ONLY!!! 1. _______________ 11. _______________ 21. _______________ 2. _______________ 12. _______________ 22. _______________ 3. _______________ 13. _______________ 23. _______________ 4. _______________ 14. _______________ 24. _______________ 5. _______________ 15. _______________ 25. _______________ 6. _______________ 16. _______________ 26. _______________ 7. _______________ 17. _______________ 27. _______________ 8. _______________ 18. _______________ 28. _______________ 9. _______________ 19. _______________ 29. _______________ 10. _______________ 20. _______________ 30. _______________
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PART I: MULTIPLE CHOICE – Record your choice for the most correct answer on the answer sheet. Please use capital letters (A, B, C, D or E). There is only one most correct answer per question. 1. A perpetuity is defined as a series of equal cash flows that occur at the end of each period for a fixed period of time. a. True b. False 2. As the interest rate increases, the present value a series of cash flows (for example, $1,000 per year for 15 years) decreases. a. True b. False 3. All else constant, for a given nominal interest rate, an increase in the number of compounding periods per year (i.e., from semi-annual compounding to monthly compounding) will cause the present value of a sum of money to be received in the future (e.g., $100 to be received 8 years from today) to a. increase. b. decrease. c. remain the same. d. either increase or decrease depending on the number of years until the money is to be received. e. this question cannot be answered without additional information. 4. As the interest rate increases, the difference between the present value of an annuity due and the present value of an ordinary annuity (assuming positive cash flows and assuming that payments and number of periods are the same) a. increases b. decreases c. remains constant d. will increase if the cash flows last forever and will decrease if the cash flow stream is finite. e. There is not enough information given to answer this question. 5. Which of the following statements is false (assuming that the yearly cash flows are identical for both annuities and that the interest rate is greater than zero). a. The present value of an annuity due is greater than the present value of an ordinary annuity. b.
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This note was uploaded on 11/29/2011 for the course FIN 3300 taught by Professor Toddstotnitch during the Fall '11 term at Georgia State University, Atlanta.

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Exam 2 - FI 3300 - CORPORATION FINANCE Summer NAME (please...

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