Exercise 2: Present value
1. The goal of a financial manager is to:
A) Maximize sales
B) Maximize profits
C) Maximize the value of the shareholders
D) Maximize the value of the firm with both bond and stock holders
E) None of the above
2. The objective fu
Exercise 3-2: bond valuation-2
Please use the following information for questions 1 to 5
You have borrowed $20,000 from a bank to buy a car at the interest rate of
12% every year. The inflation is 3% every year.
1 What is the APR?
a) 12.00%
b)
c)
d)
e)
12
Exercise 3-3: bond valuation
.
1.The annual coupon rate of a bond equals:
A) its yield to maturity.
B) a percentage of its price.
C) the maturity value.
D) the ratio of the annual coupon payment to the par value.
E) None of the above
2.The face value of a
Exercise 3: bond valuation-1
.
Please use the following information for questions 1 to 5.
Your friend promises you an annuity of $100 each year for 10 years. The first payment is in year
0 or now. The interest rate is 10% annually and the inflation is 3%
Exercise 2-3: Present value-continue
1. To use the present value formula PV0 = C/r at time zero, which of the following is correct?
a.
b.
c.
d.
e.
There are a finite number of cash flows in the future
There are at least one billion pieces of cash flows
Th
Exercise 2-1: Present value (continue)
Please use the following information for questions 1-5
You buy a share of stock A at the price of $100 today. Next year, you expect to sell at $120 per
share. Suppose that there is no dividend and r =20%.
1. Which of