Which loan type requires the borrower to repay a single lump sum payment at some time in the future with interest? Correct Answer-Pure Discount
Which loan type requires calls for the borrower to pay interest each period and to repay the entire principal at some point in the future? Correct Answe...
FIN:3300 Exam 1 Questions With Correct Answers
Which loan type requires the borrower to repay a single lump sum
payment at some time in the future with interest? Correct Answer-Pure
Discount
Which loan type requires calls for the borrower to pay interest each
period and to repay the entire principal at some point in the future?
Correct Answer-interest-only
Suppose a business takes out a $7000 five year loan at 6 percent that will
be paid annually with a single, fixed payment each period. How much
will be the annual payment? Correct Answer-$1661.88
The rate of return is also called the Correct Answer-discount rate, hurdle
rate, and opportunity cost of capital
If you are paid $1000 at the end of each year for the next five years,
what type of cash flow did you receive? Correct Answer-an annuity
What is the present value of $1000 per year annuity for five years at an
interest rate of 12 percent? Correct Answer-$3604.78
What is the NPV of the following cash flow sequence at a discount rate
of 11 percent. (t=0, -120,000: 1, 300,000: 2, -100,000) Correct Answer--
$69,108.03
, A safe dollar is always worth less than a risky dollar because the rate of
return on a safe investment is generally low and the rate on a risky
investment is generally high Correct Answer-False
For $10,000 you can purchase a five year annuity that will pay $2504.57
per year for five years. The payments occur at the end of each year.
Calculate the effective annual interest rate implied by this arrangement
Correct Answer-8%
At an interest rate of 10 percent, which of the following sequences of
cash flows should you prefer Correct Answer-Option A, because it has
highest NPV
John House has taken a $250,000 mortgage on his house at an interest
rate of 6 percent per year. If the mortgage calls for 20 equal, annual
payments, what is the amount of each payment? Correct Answer-
$21,796.14
If the present value of $1 received n years from today at an interest rate
of r is 0.3855, then what is the future value of $1 invested today at an
interest rate of r percent for n years Correct Answer-1/0.3855 = 2.594
The opportunity cost of capital for a risky project is Correct Answer-the
expected rate of return on a security of similar risk as the project
An annuity is defined as a set of Correct Answer-equal cash flows
occurring at equal intervals of time for a specified period
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller cracker. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $14.49. You're not tied to anything after your purchase.
