Question 1. If you had $5000, which of the following TVM methods would you use to calculate what its value would be in three years?
a. Discounting
b. Compounding
c. Compounding an annuity
d. Discounting an annuity
e. Amortizing
Question 2. A security's risk premium is?
a. Its Beat times the market return
b. Difference between the required return and the risk free rate
c. Weighted average of the individual security beta's in a portfolio
d. The security covariance divided by the variance of the portfolio
e. The same value as the market s risk premium
Question 3. Which of the following capital budget model does not use Time Value of Money calculations?
a. Internal Rate of Return (IRR)
b. Modified Internal Rate of Return (MIRR)
c. Payback
d. Net Present Value (NPV)
e. All use Time Value of Money calculations
Question 4. Which of the following factors should be considered in calculating capital budget projects?
a. The selection model to be used
b.Taxes
c. Depreciation
d. Risk
e. All of the above
Question 5. If an organization's debt rating decreases, what will happen to its cost of debt financing?
a. It will remain the same
b. It will decrease
c. It will increase
d. The SEC will ban them from issuing debt
e. It will be more attractive to investors