CHAPTER 6Discounted Cash Flow ValuationI.DEFINITIONSANNUITYa1.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 ANNUITIESb2.The present value factor for annuities is calculated as:FUTURE VALUE FACTOR FOR ANNUITIESd3.The future value factor for annuities is calculated as the:ANNUITIES DUEe4.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.PERPETUITYc5.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.

CHAPTER 6STATED INTEREST RATESa6.The interest rate expressed in terms of the interest payment made each period is called the _____ rate.EFFECTIVE ANNUAL RATEc7.The interest rate expressed as if it were compounded once per year is called the _____ rate.ANNUAL PERCENTAGE RATEb8.The interest rate charged per period multiplied by the number of periods per year is called the _____ rate.PURE DISCOUNT LOANd9.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.amortizedb.continuousc.balloond.pure discounte.interest-onlyINTEREST-ONLY LOANe