1. The payment structure of a corporate bond is best thought of as:
an annuity of interest payments.
an annuity of principal and interest payments.
an annuity of principal payments.
an annuity of interest payments and a single principal payment at maturity.
Question 2.2. In an amortized loan, the principal portion:
increases with every payment and is zero with the last payment.
increases with every payment and completely repays the loan with the last payment.
increases with every payment but at a decreasing rate.
does not change with every payment.
Question 3.3. Which of the following statements is NOT true about future values?
All else equal, the higher the interest rate, the larger the future value.
All else equal, the lower the interest rate, the larger the future value.
All else equal, the longer the investment time, the larger the future value.
All else equal, the larger the starting amount, the larger the future value.
Question 4.4. An ordinary annuity has its first payment ______, but an annuity due has its first payment _________.
at the beginning of the period; at the beginning of the period.
at the beginning of the period; at the end of the period.
at the end of the period; at the end of the period.
at the end of the period; at the beginning of the period.
Question 5.5. Simple interest means that: (Points : 1)
the interest rate is the same every period.
the dollar amount of interest is the same every period.
interest is only paid once a year.
the compounding periods are annual.
Question 6.6. In an amortized loan:
the payments are the same every period, but the proportion that is interest increases.
the payments are the same every period, and the proportion that is interest also is unchanged.
the payments vary every period, but the proportion that is interest doesn't change.
the payments are the same every period, but the proportion that is interest decreases.
Question 7.7. We would expect that, all else being equal, investors would pay less for a stock that they view as having become more risky. Assume a stock has just paid a $2.00-per-share dividend. Analysts believe that future dividends will grow at a 14% rate. The constant dividend growth rate is 4%. What would the stock price be?
$14.29
$20.00
$20.80
$28.57
Question 8.8. Assume a stock has just paid a $2.00-per-share dividend. Analysts believe that future dividends will grow at a 4% rate forever, and investors require an 11% return on their investment in this stock. What should the stock's price be?
$18.18
$28.57
$29.71
$31.71
Question 9.9. GMX Resources, an independent oil and gas exploration and production company, has a 9.25% preferred stock outstanding, which pays an annual dividend of $2.3125. If investors require a return of 15% on small companies in this sector, what will this preferred stock sell for?
$14.11
$14.72
$15.41
$28.58
Question 10.10. The longer we have to wait for a future amount to be received:
the lower its present value will be.
the higher its present value will be.
Time does not affect present value, so it doesn't matter how long we have to wait.
Beyond 10 years the value doesn't change anymore because 10 years might as well be 20 years.