Ch 4 - Chapter 04 - Discounted Cash Flow Valuation Chapter...

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Chapter 04 - Discounted Cash Flow Valuation 4-1 Chapter 04 Discounted Cash Flow Valuation Answer Key Multiple Choice Questions 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. Difficulty level: Easy Topic: ANNUITY Type: DEFINITIONS 2. 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 Difficulty level: Easy Topic: ANNUITIES DUE Type: DEFINITIONS
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Chapter 04 - Discounted Cash Flow Valuation 4-2 3. 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. Difficulty level: Easy Topic: PERPETUITY Type: DEFINITIONS 4. The interest rate expressed in terms of the interest payment made each period is called the _____ rate. A. stated annual interest B. compound annual interest C. effective annual interest D. periodic interest E. daily interest Difficulty level: Easy Topic: STATED INTEREST RATES Type: DEFINITIONS 5. 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 Difficulty level: Easy Topic: EFFECTIVE ANNUAL RATE Type: DEFINITIONS
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Chapter 04 - Discounted Cash Flow Valuation 4-3 6. 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 Difficulty level: Easy Topic: ANNUAL PERCENTAGE RATE Type: DEFINITIONS 7. Paying off long-term debt by making installment payments is called: A. foreclosing on the debt. B. amortizing the debt. C. funding the debt. D. calling the debt. E. None of the above. Difficulty level: Easy Topic: AMORTIZATION Type: DEFINITIONS 8. You are comparing two annuities which offer monthly payments for ten years. Both annuities are identical with the exception of the payment dates. Annuity A pays on the first of each month while annuity B pays on the last day of each month. Which one of the following statements is correct concerning these two annuities?
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This note was uploaded on 03/03/2012 for the course ECON 106 taught by Professor Sengupta,j during the Fall '08 term at UCSB.

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Ch 4 - Chapter 04 - Discounted Cash Flow Valuation Chapter...

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