FINC400 I004 quiz 4

FINC400

Week 4

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Question 1 of 25 4.0 Points If the inflation premium for a bond goes up, the price of the bond A.is unaffected. B.goes down. C.goes up. D.need more information

Question 2 of 25 4.0 Points The interest factor for the present value of a single amount is the inverse of the future value interest factor. A. True B. False
Question 3 of 25	4.0 Points

The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.

A. True B. False
Question 4 of 25	4.0 Points

(point) The longer the time to maturity:

A.the greater the price increase from an increase in interest rates.
B.the less the price increase from an increase in interest rates.
C.the greater the price increase from a decrease in interest rates.
D.the less the price decrease from a decrease in interest rates.

Question 5 of 25

4.0 Points

(point) As the interest rate increases, the interest factor (IF) for the present value of $1 increases.

A. True B. False
Question 6 of 25	4.0 Points

Financial capital does not include

A.stock.
B.bonds.
C.preferred stock.
D.working capital.
Question 7 of 25	4.0 Points

The growth rate for the firm's common stock is 7%. The firm’s preferred stock is paying an annual dividend of $3. What is the preferred stock price if the required rate of return is 8%?

A.$3.00
B.$37.50
C.$50.00
D.none of these
Question 8 of 25	4.0 Points

In paying off a mortgage loan, the amount of the periodic payment that goes toward the reduction of principal increases over the life of the mortgage.

A. True B. False

Question 9 of 25

4.0 Points

The calculation of the cost of capital depends upon historical costs of funds.

A. True B. False
Question 10 of 25	4.0 Points

(point) The calculation of the cost of capital depends upon historical costs of funds.

A. True B. False
Question 11 of 25	4.0 Points

As the interest rate increases, the interest factor (IF) for the present value of $1 increases.

A. True B. False
Question 12 of 25 4.0 Points (point) An annuity may be defined as A.a payment at a fixed interest rate. B.a series of payments of unequal amount. C.a series of yearly payments. D.a series of consecutive payments of equal amounts. Reset Selection uestion 13 of 25 4.0 Points As the time period until receipt increases, the present value of an amount at a fixed interest rate A.decreases. B.remains the same. C.increases. D.Not enough information to tell. Question 14 of 25 4.0 Points (point) Within the capital asset pricing model A.the risk-free rate is usually higher than the return in the market. B.the higher the beta the lower the required rate of return. C.beta measures the volatility of an individual stock relative to a stock market index. D.two of the above are true. Question 15 of 25 4.0 Points The risk premium is primarily concerned with business risk, financial risk, and inflation risk. A. True B. False uestion 16 of 25 4.0 Points When inflation rises, preferred stock prices fall. A. True B. False
uestion 17 of 25	4.0 Points

(point) If the inflation premium for a bond goes up, the price of the bond

A.is unaffected.
B.goes down.
C.goes up.
D.need more information.

uestion 18 of 25

4.0 Points

The cost of capital for each source of funds is dependent on current market conditions and expected rates of return.

A. True B. False
Question 19 of 25	4.0 Points

(point) The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.

A. True B. False
uestion 20 of 25	4.0 Points

The time value of money concept becomes less critical as the prime rate increases.

A. True B. False
Question 21 of 25	4.0 Points

If a single amount were put on deposit at a given interest rate and allowed to grow, its future value could be determined by reference to the future value of $1 table.

A. True B. False
Question 22 of 25	4.0 Points

The risk premium is equal to the required yield to maturity minus both the real rate of return and the inflation premium.

A. True B. False
Question 23 of 25	4.0 Points

The required return by investors is important to financial managers for all of the following reasons except:

A.It influences the firm's cost of financing
B.It influences their stock price
C.It is the primary driver of their financial ratios
D.It helps when pricing new issues of securities
uestion 24 of 25	4.0 Points

Lewis, Schultz and Nobel Development Corp. has an after-tax cost of debt of 4.5 percent. With a tax rate of 30 percent, what is the yield on the debt?

A.4.41%
B.9.0%
C.1.89%
D.6.43%
Question 25 of 25 4.0 Points You are to receive $12,000 at the end of 5 years. The available yield on investments is 6%. Which table would you use to determine the value of that sum today? A.Present value of an annuity of $1 B.Future value of an annuity C.Present value of $1 D.Future value of $1