财务管理 CHAPTER 6.docx

财务管理 CHAPTER 6.docx

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财务管理CHAPTER6

CHAPTER6

DiscountedCashFlowValuation

I.DEFINITIONS

ANNUITY

a1.Anannuitystreamofcashflowpaymentsisasetof:

a.levelcashflowsoccurringeachtimeperiodforafixedlengthoftime.

b.levelcashflowsoccurringeachtimeperiodforever.

c.increasingcashflowsoccurringeachtimeperiodforafixedlengthoftime.

d.increasingcashflowsoccurringeachtimeperiodforever.

e.arbitrarycashflowsoccurringeachtimeperiodfornomorethan10years.

PRESENTVALUEFACTORFORANNUITIES

b2.Thepresentvaluefactorforannuitiesiscalculatedas:

a.（1+presentvaluefactor）?

r.

b.（1–presentvaluefactor）?

r.

c.presentvaluefactor+（1?

r）.

d.（presentvaluefactor?

r）+（1?

r）.

e.r?

（1+presentvaluefactor）.

FUTUREVALUEFACTORFORANNUITIES

d3.Thefuturevaluefactorforannuitiesiscalculatedasthe:

a.futurevaluefactor+r.

b.（1?

r）+（futurevaluefactor?

r）.

c.（1?

r）+futurevaluefactor.

d.（futurevaluefactor–1）?

r.

e.（futurevaluefactor+1）?

r.

ANNUITIESDUE

e4.Annuitieswherethepaymentsoccurattheendofeachtimeperiodarecalled_____,whereas_____refertoannuitystreamswithpaymentsoccurringatthebeginningofeachtimeperiod.

a.ordinaryannuities;earlyannuities

b.lateannuities;straightannuities

c.straightannuities;lateannuities

d.annuitiesdue;ordinaryannuities

e.ordinaryannuities;annuitiesdue

PERPETUITY

c5.Anannuitystreamwherethepaymentsoccurforeveriscalleda（n）:

a.annuitydue.

b.indemnity.

c.perpetuity.

d.amortizedcashflowstream.

e.amortizationtable.

STATEDINTERESTRATES

a6.Theinterestrateexpressedintermsoftheinterestpaymentmadeeachperiodiscalledthe_____rate.

a.statedinterest

b.compoundinterest

c.effectiveannual

d.periodicinterest

e.dailyinterest

EFFECTIVEANNUALRATE

c7.Theinterestrateexpressedasifitwerecompoundedonceperyeariscalledthe_____rate.

a.statedinterest

b.compoundinterest

c.effectiveannual

d.periodicinterest

e.dailyinterest

ANNUALPERCENTAGERATE

b8.Theinterestratechargedperperiodmultipliedbythenumberofperiodsperyeariscalledthe_____rate.

a.effectiveannual

b.annualpercentage

c.periodicinterest

d.compoundinterest

e.dailyinterest

PUREDISCOUNTLOAN

d9.Aloanwheretheborrowerreceivesmoneytodayandrepaysasinglelumpsumatsometimeinthefutureiscalleda（n）_____loan.

a.amortized

b.continuous

c.balloon

d.purediscount

e.interest-only

INTEREST-ONLYLOAN

e10.Aloanwheretheborrowerpaysinteresteachperiodandrepaystheentireprincipaloftheloanatsomepointinthefutureiscalleda（n）_____loan.

a.amortized

b.continuous

c.balloon

d.purediscount

e.interest-only

AMORTIZEDLOAN

a11.Aloanwheretheborrowerpaysinteresteachperiod,andrepayssomeoralloftheprincipaloftheloanovertimeiscalleda（n）_____loan.

a.amortized

b.continuous

c.balloon

d.purediscount

e.interest-only

BALLOONLOAN

c12.Aloanwheretheborrowerpaysinteresteachperiod,repayspartoftheprincipaloftheloanovertime,andrepaystheremainderoftheprincipalattheendoftheloan,iscalleda（n）_____loan.

a.amortized

b.continuous

c.balloon

d.purediscount

e.interest-only

II.CONCEPTS

ORDINARYANNUITYVERSUSANNUITYDUE

c13.Youarecomparingtwoannuitieswhichoffermonthlypaymentsfortenyears.Bothannuitiesareidenticalwiththeexceptionofthepaymentdates.AnnuityApaysonthe

firstofeachmonthwhileannuityBpaysonthelastdayofeachmonth.Whichoneof

thefollowingstatementsiscorrectconcerningthesetwoannuities?

a.Bothannuitiesareofequalvaluetoday.

b.AnnuityBisanannuitydue.

c.AnnuityAhasahigherfuturevaluethanannuityB.

d.AnnuityBhasahigherpresentvaluethanannuityA.

e.Bothannuitieshavethesamefuturevalueasoftenyearsfromtoday.

UNEVENCASHFLOWSANDPRESENTVALUE

b14.Youarecomparingtwoinvestmentoptions.Thecosttoinvestineitheroptionisthe

sametoday.Bothoptionswillprovideyouwith$20,000ofincome.OptionApaysfive

annualpaymentsstartingwith$8,000thefirstyearfollowedbyfourannualpaymentsof$3,000each.OptionBpaysfiveannualpaymentsof$4,000each.Whichoneofthe

followingstatementsiscorrectgiventhesetwoinvestmentoptions?

a.Bothoptionsareofequalvaluegiventhattheybothprovide$20,000ofincome.

b.OptionAisthebetterchoiceofthetwogivenanypositiverateofreturn.

c.OptionBhasahigherpresentvaluethanoptionAgivenapositiverateofreturn.

d.OptionBhasalowerfuturevalueatyear5thanoptionAgivenazerorateofreturn.

e.OptionAispreferablebecauseitisanannuitydue.

UNEVENCASHFLOWSANDFUTUREVALUE

a15.Youareconsideringtwoprojectswiththefollowingcashflows:

ProjectAProjectB

Year1$2,500$4,000

Year23,0003,500

Year33,5003,000

Year44,0002,500

Whichofthefollowingstatementsaretrueconcerningthesetwoprojects?

I.Bothprojectshavethesamefuturevalueattheendofyear4,givenapositiverateofreturn.

II.Bothprojectshavethesamefuturevaluegivenazerorateofreturn.

III.Bothprojectshavethesamefuturevalueatanypointintime,givenapositiverateof

return.

IV.ProjectAhasahigherfuturevaluethanprojectB,givenapositiverateofreturn.

a.IIonly

b.IVonly

c.IandIIIonly

d.IIandIVonly

e.I,II,andIIIonly

PERPETUITYVERSUSANNUITY

d16.Aperpetuitydiffersfromanannuitybecause:

a.perpetuitypaymentsvarywiththerateofinflation.

b.perpetuitypaymentsvarywiththemarketrateofinterest.

c.perpetuitypaymentsarevariablewhileannuitypaymentsareconstant.

d.perpetuitypaymentsnevercease.

e.annuitypaymentsnevercease.

ANNUALPERCENTAGERATE

e17.Whichoneofthefollowingstatementsconcerningtheannualpercentagerateis

correct?

a.Theannualpercentagerateconsidersinterestoninterest.

b.Therateofinterestyouactuallypayonaloaniscalledtheannualpercentagerate.

c.Theeffectiveannualrateislowerthantheannualpercentageratewhenaninterestrate

iscompoundedquarterly.

d.WhenfirmsadvertisetheannualpercentageratetheyareviolatingU.S.truth-in-lendinglaws.

e.Theannualpercentagerateequalstheeffectiveannualratewhentherateonan

accountisdesignatedassimpleinterest.

INTERESTRATES

b18.Whichoneofthefollowingstatementsconcerninginterestratesiscorrect?

a.Thestatedrateisthesameastheeffectiveannualrate.

b.Aneffectiveannualrateistheratethatappliesifinterestwerechargedannually.

c.Theannualpercentagerateincreasesasthenumberofcompoundingperiodsperyear

increases.

d.Banksprefermorefrequentcompoundingontheirsavingsaccounts.

e.Foranypositiverateofinterest,theeffectiveannualratewillalwaysexceedtheannual

percentagerate.

EFFECTIVEANNUALRATE

c19.Whichofthefollowingstatementsconcerningtheeffectiveannualratearecorrect?

I.Whenmakingfinancialdecisions,youshouldcompareeffectiveannualratesratherthanannualpercentagerates.

II.Themorefrequentlyinterestiscompounded,thehighertheeffectiveannualrate.

III.Aquotedrateof6percentcompoundedcontinuouslyhasahighereffectiveannualrate

thaniftheratewerecompoundeddaily.

IV.Whenchoosingwhichloantoaccept,youshouldselecttheofferwiththehighesteffectiveannualrate.

a.IandIIonly

b.IandIVonly

c.I,II,andIIIonly

d.II,III,andIVonly

e.I,II,III,andIV

CONTINUOUSCOMPOUNDING

d20.Thehighesteffectiveannualratethatcanbederivedfromanannualpercentagerateof

9percentiscomputedas:

a..09e-1.

b.e.09?

q.

c.e?

（1+.09）.

d.e.09–1.

e.（1+.09）q.

PUREDISCOUNTLOAN

a21.Apurediscountloanisa（n）:

a.exampleofapresentvalueproblem.

b.loanthatisinterest-free.

c.loanthatgivesyouadiscountifyoupayyourpaymentsontime.

d.loanthatrequiresallinteresttobepaidatthetimetheloanismade.

e.loanthatdiscountsthepaymentsifyoupaytheminadvance.

INTEREST-ONLYLOAN

c22.Theprincipleamountofaninterest-onlyloanis:

a.neverrepaid.

b.repaidinequalincrementsandincludedineachloanpayment.

c.repaidinfullattheendoftheloanperiod.

d.repaidinequalannualpaymentsevenwhentheloaninterestisrepaidmonthly.

e.repaidinincreasingincrementsandincludedineachloanpayment.

AMORTIZEDLOAN

b23.Anamortizedloan:

a.requirestheprincipleamounttoberepaidinevenincrementsoverthelifeoftheloan.

b.mayhaveequalorincreasingamountsappliedtotheprinciplefromeachloan

payment.

c.requiresthatallinterestberepaidonamonthlybasiswhiletheprincipleisrepaidat

theendoftheloanterm.

d.requiresthatallpaymentsbeequalinamountandincludebothprincipleandinterest.

e.isthetypeofloanthatdescribesmostcorporatebonds.

III.PROBLEMS

ORDINARYANNUITYANDPRESENTVALUE

d24.Yourparentsaregivingyou$100amonthforfouryearswhileyouareincollege.Ata

6percentdiscountrate,whatarethesepaymentsworthtoyouwhenyoufirststart

college?

a.$3,797.40

b.$4,167.09

c.$4,198.79

d.$4,258.03

e.$4,279.32

ORDINARYANNUITYANDPRESENTVALUE

b25.Youjustwonthelottery!

Asyourprizeyouwillreceive$1,200amonthfor100months.Ifyoucanearn8percentonyourmoney,whatisthisprizeworthtoyoutoday?

a.$87,003.69

b.$87,380.23

c.$87,962.77

d.$88