Mary has deposited just now $1,000 in a savings account at the Chase Bank. She plans on depositing the amount for 2 years. In finance, we call the $1,000 (the value of deposit today) the ____________________.future valuepresent valueprincipal amountdiscounted valueinvested principal

Joan is computingthe present value of a $5,000 bonus she will receive in 1 year. The interest rate she is using in this process is called the___________.current yieldeffective ratecompound ratesimple ratediscount rate

Your rich aunt has promised to give you a $200,000-gift on your graduation from an MBA program in four years. What happens to the present value of this gift if you speed up your study to graduate three years from now?remains constantincreasesdecreasesbecomes negativecannot be determined from the information provided

You want to have $2 million in your savings account when you retire. You are going to invest a single lump sum today to fund this goal. You plan on investing in an account which will pay you 5 percent annual interest. Which of the following will increase the amount that you must deposit today to reach your retirement saving goal?I. Retire later.II. Retire sooner.III. Invest in a different account paying 3 percent interest.IV. Invest in a different account paying 7 percentinterest.I onlyII onlyIV onlyI and III onlyII and III only

The interest rate quoted by a lender in a loan is called the ______________.stated interest rate (annual percentage rate)compound rateeffective annual ratesimple ratecommon rate

Which of the following statements related to interest rates are correct?I. When comparing loans, you should compare the effective annual rate.II. Annual and effective interest rates are equal when interest is compounded annually.III. Effective annual rates consider the effect of interest earned on reinvested interest payments.IV. Lenders are required by law to disclose the effective annual rate of a loan to prospective borrowers.I and II onlyIII onlyIV onlyI, II and III onlyII, III, and IV only

Which of the following statements concerning interest rates is/are correct?I. Savers would prefer monthly compounding over annual compounding.II. Borrowers would prefer monthly compounding over annual compounding.III. The effective annual rate will never be equal tothe annual percentage rate.IV. The effective annual rate increases as the number of compounding periods per year decreases.V. For any positive rate of interest, the effective annual rate will always exceed the annual percentage rate.I onlyIII onlyI and II onlyI, III and IV onlyII, III and V only

Which of the following statements related to annuities and perpetuities is/are correct?I. Most loans are a form of a perpetuity.II. Perpetuities are finite but annuities are not.III.The present value of a perpetuity can be computed, but the future value cannot.IV. An ordinary annuity is worth more than an annuity due given equal annual cash flows for five years at 10 percent interest, compounded annually.V. A perpetuity comprised of $500 monthly payments is worth more than an ten year annuity comprised of $500 monthly payments, given an interest rate of 12 percent, compounded monthly.II and III onlyI, II and IV onlyIV and V onlyIII and V onlyI, II, IV and V only

Which of the following statements do/does notstate a relationship correctly?I. Time and future values are negatively related, all else held constant.II. Interest rates and time are positively related, all else held constant.III. An increase in the discount rate increases the present value, given positive rates.IV. Time has the greatest impact on the future value given a zero rate of interest among other interest rates.V. Time and present value are inversely related, all else held constant.III and IV onlyIV and V onlyI, II, III and IV onlyI and V onlyI, II and III only

Joanna has just purchased a bond issued by Dell, Inc. The bond pays $45 once a year in interest. The par value of the bond is $1,000 and the coupon rate is 4.5%.This $45 is thus called ______________.annual couponface valuediscountsemi-annual couponyield

If the bond market now requires a return of 8 percent on the 20-year bonds issued by Advanced Computers, Inc., then the 8 percent should be the bond's ____________.coupon rateface ratecall rateyield to maturitycoupon rate

Wal-mart has issued today bonds that do not make coupon payments over their lives, these bonds are examples of _______________.debenturescallable bondsfloating-rate bondsjunk bondszero coupon bonds

Walkman's 10-year bond has now a market price that is equal to its par (or face) value. Which of the following features currently apply/applies to this bond?I. sells at par valueII. sells at premium priceIII. sells at discounted priceIV. yield-to-maturity that exceeds the coupon rateV. yield-to-maturity that is less than the coupon rateVI. yield-to-maturity that is equal to the coupon rateIII onlyI and VIonlyI and IV onlyI, II and III onlyII, IIIand IV only

Pricelinehas an annual coupon bond outstanding. All else equal, if the market interest rate decreases, what will happen to the bond?increase in the coupon ratedecrease in the coupon rateincrease in the market pricedecrease in the market priceincrease in the time period

Which of the following relationships apply/applies to a discount bond?I. coupon rate > yield-to-maturityII. current yield = yield-to-maturityIII. market price = call priceIV. market price < face valueI onlyI and IV onlyIV onlyI, II, and III onlyII, III, and IV only

Which of the following will decrease the price sensitivity of a bond to changes in interest rates?I. decrease in coupon rateII. increase in coupon rateIII. increase in time to maturityIV. decrease in time to maturityII onlyI and III onlyI and IV onlyII and III onlyII and IV only

The model that enables us to estimate the present value of a stock based on its next annual dividend, the annual dividend growth rate, and the applicable annual discount rate is called ___________________.zero growth modeldividend growth modelcapital pricing modelearnings capitalization modeldiscounted price model

In accordance with the dividend growth model, a decrease in ____________ will lead to a decrease inthe current value of a stock.I. discount rateII. dividend amountIII. dividend growth rateI onlyII onlyI and II onlyII and III onlyI, II and III

The dividend growth model:I. can be used to value zero-growth stocks.II. can be used to compute a stock's price at any point in time.III. requires the growth rate to be lower than the required return.IV. assumes that dividends increase by aconstant amount forever.I onlyII onlyI and IV onlyIII and IV onlyI, II and III only

The major assumption of the dividend growth model is :A stock has the same value to every investor.A stock's value is equal to the discounted present value of the future cash flows which it generates.A stock's value changes in direct relation to the required return.Stocks that pay the same annual dividend have equal market values.The dividend growth rate is inversely related to a stock's market price.

Which of the following statements is/are correct concerning the two-stage dividend growth model?I. G1 can be negative.II. Pt = Dt/R.III.G1 must be greater than G2.IV.G1 can be greater than R.V. R must be less than G1 but greater than G2.I, II and III onlyI and IV onlyNone of the statements is correct.III and V onlyI, II, IV and V only

As a holder of 1,000 shares of Best Bank's preferred stock, Cary Stevenson has the right(s) to ___________________ of the company. I. elect the corporate directorsII. vote on proposed mergersIII. share in company profits prior to other shareholdersIV. all residual income after the common dividends have been paidI onlyIII onlyI and IV onlyII, III, and IV onlyI, II, III, and IV

Which of the following statements is/are correct?I. Preferred stocks have positive growth dividends.II. The capital gains yield is the semi-annual rate of change in a stock's price.III. A constant dividend stock can be valued using the dividend growth model.IV. The dividend growth model can be used to compute the current value of some particular types of stocks only.V. An increase in the required return will decrease the capital gains yield assuming that the dividend yield remains constant.I and II onlyI, II and III onlyIII and V onlyI, II, III and V onlyI, II, III, IV and V