1. Which of the following is an example of a firm's long-term debt?
a Retained earnings
b Accounts receivable
c Corporate bonds
d Accounts payable
2. Ibiza Corporation has been investing $20,000 for the last four years in an investment scheme that is maturing at the end of the current year. It will be receiving $120,000 at the time of maturity. The $120,000 received at maturity is referred to as _____.
a ordinary annuity
b deferred annuity
c uneven cash flow
d lump-sum amount
3. An annuity with payments that occur at the beginning of each period is known as a _____.
a deferred annuity
b immediate annuity
c ordinary annuity
d annuity due
4. Jason's opportunity cost rate is 8 percent compounded annually. How much must he deposit in an account today if he wants to receive $5,400 at the end of each of the next 10 years? Nper = 10, Rate= 8, FV = 0, PMT = –5,400
a $34,852
b $40,252
c $36,234
5. Which of the following is defined as the rate of return on the best available alternative investment of equal risk?
a Amortization rate
b Opportunity cost rate
c Expected rate of return
d Risk adjusted rate
Ten years ago, Emma purchased an investment for $22,500. The investment earned 7 percent interest each year. What is the worth of the investment today?
a $46,458
b $44,325
c $40,527
d $36,667