How are future values affected by changes in interest rates? - Answer-The lower the interest rate, the larger the future value will be
We call the process of earning interest on both the original deposit and on the earlier interest payments: - Answer-compounding
the process of figuring out ho...
FIN 301 Midterm Exam Questions with
Latest Update
How are future values affected by changes in interest rates? - Answer-The lower the
interest rate, the larger the future value will be
We call the process of earning interest on both the original deposit and on the earlier
interest payments: - Answer-compounding
the process of figuring out how much an amount that you expect to receive in the future
is worth today is called: - Answer-discounting
A deposit of $500 earns the following interest rates: 5 percent in the first year, 6 percent
in the second year, and 8 percent in the third year. What will be the third year future
value - Answer-601.02
What is the value in year 3 of a $500 cash flow made in year 5 when interest rates are 6
percent? - Answer-445
You invested $5,000 in the stock market one year ago. Today the investment is valued
at $4,500. What Return did you earn? What return would you need to get next year to
break even overall? - Answer--10 percent, 11.11 percent, respectively
the simple form of an annualized interest rate is called the annual percentage (APR).
The effective annual rate(EAR) is a: - Answer-more accurate measure of the interest
rate paid for monthly compounding
Once firms issue financial instruments in primary markets, these same stocks and
bonds are then traded in which of these? - Answer-Secondary markets
Which of the following reasons is why bonds are known as fixed income investments? -
Answer-Investors know how much they will receive in interest payments.
Regarding a bond's characteristics, which of the following is the principal loan amount
that the borrower must repay? - Answer-Par or face value
Which of the following determines the dollar amount of interest paid to bondholders? -
Answer-coupon rate
Which of the following is true regarding U.S. Government Agency Securities? - Answer-
They do not carry the federal governments full faith and credit guarantee
which of the following is a true statement? - Answer-if interest rates fall, all bonds will
increase in price
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