Chapter 7
Stocks and Stock Valuation
Questions
1. What are three key features of common stock?
There are many features to choose from but here is a list of three key features:
(1) Residual Claim: the common stock shareholder is entitled to all assets and

Chapter 2
Financial Statements
Questions
2. What is the difference between a current asset and a long-term asset? What is
the difference between a current liability and a long-term liability? What is the
difference between a debtors claim and an owners cl

Chapter 11
The Cost of Capital
Questions
1. From what sources can a company raise capital? Do these different sources of capital all
charge the same rate? Why or why not?
2. Why is the yield to maturity on a bond the appropriate cost of debt financing?
5.

Payments. Sam Hinds, a local dentist, is going to remodel the dental
reception area and two new workstations. He has contacted A-Dec, and
the new equipment and cabinetry will cost $18,000. A-Dec will finance
the equipment purchase at 7.5% over a six-year

Estimating the annual interest rate with an ordinary annuity. Fill in the
missing annual interest rates in the following table for an ordinary
annuity stream.
Number of Payments
or Years
Future Value
Annuity
10
0
$500
20
$25,000
$346.97
30
0
$1,946.73
100

Estimating the annual interest rate with an ordinary annuity. Fill in the
missing annual interest rates in the following table for an ordinary
annuity stream.
Number of Payments
or Years
Future Value
Annuity
10
0
$500
20
$25,000
$346.97
30
0
$1,946.73
100

Chapter 11
The Cost of Capital
Questions
1. From what sources can a company raise capital? Do these different sources of
capital all charge the same rate? Why or why not?
A company can borrow from owners, preferred stockholders, banks, non-bank lenders,
s

Chapter 6
Bonds and Bond Valuation
Questions
1. What is a bond? What determines the price of this financial asset?
A bond is a promised set of future payments from the issuer to the buyer of the bond
where a formal agreement states the timing and amount o

Chapter 9
Capital Budgeting Decision Models
Questions
1. How does a business determine if a project (new product or service) is
worthwhile?
Projects are accepted or rejected based on the use of one of many capital budgeting
models. Using the cash flow of

Lecture 5: REMEDIES, MORAL RIGHTS & PERFORMERS RIGHTS
Background Reading:
Frankel: pp 299 327
Sumpter: pp 59-66 and 132-137
REMEDIES FOR INFRINGEMENT OF COPYRIGHT
Remedies are available to copyright owners and to exclusive licensees. Copyright
infringem

Lecture 4: COPYRIGHT INFRINGEMENT
Readings:
Frankel: Ch 6 and pp 261-297
Sumpter: Ch 2
Legal action may only be taken against a person who infringes copyright by the copyright
owner, and/or the exclusive licensee.
A. Primary and Secondary Infringement
P

Inflation, nominal interest rates, and real rates. Given the information
below, estimate the nominal interest rate with the approximate nominal
interest rate equation and the true nominal interest rate equation.
Real Rate
Inflation Rate
3%
5%
8%
15%
1%
4%

Inflation, nominal interest rates, and real rates. Given the information
below, estimate the nominal interest rate with the approximate nominal
interest rate equation and the true nominal interest rate equation.
Real Rate
Inflation Rate
3%
5%
8%
15%
1%
4%

Amortization schedule. Ponzi may choose to pay off the loan early if
interest rates change during the next ten years. Determine the ending
balance of the loan each year under three different payment plans: a
discount loan, an interest-only loan, and an am

Fully amortized loan (annual payments for principal and interest with
the same amount each year). Determine the cash flow to the woman
under a fully amortized loan, in which Ponzi will make equal annual
payments at the end of each year so that the final p

Fully amortized loan (annual payments for principal and interest with
the same amount each year). Determine the cash flow to the woman
under a fully amortized loan, in which Ponzi will make equal annual
payments at the end of each year so that the final p

Payments. Sam Hinds, a local dentist, is going to remodel the dental
reception area and two new workstations. He has contacted A-Dec, and
the new equipment and cabinetry will cost $18,000. A-Dec will finance
the equipment purchase at 7.5% over a six-year

Discount loan (interest and principal at maturity). Determine the cash
flow to the woman under a discount loan, in which Ponzi will have a
lump-sum payment at the end of the contract.
ANSWER
FV = $25,000 1.1010 = $25,000 2.593742 = $64,843.56

Discount loan (interest and principal at maturity). Determine the cash
flow to the woman under a discount loan, in which Ponzi will have a
lump-sum payment at the end of the contract.

Annuity due. Reginald is about to lease an apartment for the year. The
landlord wants the lease payments paid at the start of the month. The
twelve monthly payments are $1,300 per month. The landlord says he
will allow Reginald to prepay the rent for the

Annuity due. Reginald is about to lease an apartment for the year. The
landlord wants the lease payments paid at the start of the month. The
twelve monthly payments are $1,300 per month. The landlord says he
will allow Reginald to prepay the rent for the

Annuity due. Reginald is about to lease an apartment for the year. The
landlord wants the lease payments paid at the start of the month. The
twelve monthly payments are $1,300 per month. The landlord says he
will allow Reginald to prepay the rent for the

Perpetuities. The Canadian Government has once again decided to issue
a consol (a bond with a never-ending interest payment and no maturity
date). The bond will pay $50 in interest each year (at the end of the year)
but never return the principal. The cur

19. Interest-only loan (regular interest payments each year and principal
at end). Determine the cash flow to the woman under an interest-only
loan, in which Ponzi will pay the annual interest expense each year and
pay the principal back at the end of the

19. Interest-only loan (regular interest payments each year and principal
at end). Determine the cash flow to the woman under an interest-only
loan, in which Ponzi will pay the annual interest expense each year and
pay the principal back at the end of the

Inflation, nominal interest rates, and real rates. Given the information
below, estimate the nominal interest rate with the approximate nominal
interest rate equation and the true nominal interest rate equation.
Real Rate
Inflation Rate
3%
5%
8%
15%
1%
4%

Interest premium. The U.S. government offers two bonds: one selling to
yield 6.5% and the other to yield 8.5%. Why would one bond sell for a
lower yield if the originator is the same on both bonds?
ANSWER
If the bonds have different maturity dates the dif

FINANCE
Finance is the art and science of managing wealth
Movement of money from lenders to the borrowers
4 main interconnected and interrelated areas:
Corporate finance
Investment
Financial institutions and markets
International finance
Financial markets