Which one of the following statements is correct concerning annual percentages rates (APRs)? Answer: The APR is equal to the monthly interest rate multiplied by 12 Give an interest rate of zero percent‚ the future value of a lump sum invested today will always: Answer: remain constant Answer: II and IV A firm created as a separate and distinct legal entity that may be owned by one or more individuals or entities is called a: corporation The capital structure of a firm refers to the
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firms. How is this possible? Does this violate our basic principle of stock valuation? Explain. Our basic principle of stock valuation is that the value of a share of stock is simply equal to the present value of all of the expected dividends on the stock. According to the dividend growth model‚ an asset that has no expected cash flows has a value of zero‚ so if investors are willing to purchase shares of stock in firms that pay no dividends‚ they evidently expect that the firms will begin paying
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Chapter 6 The Time Value of Money-Annuities and Other Topics 6.1 Annuities 1) You wish to borrow $2‚000 to be repaid in 12 monthly installments of $189.12. The annual interest rate is: A) 24%. B) 8%. C) 18%. D) 12%. 2) If you have $20‚000 in an account earning 8% annually‚ what constant amount could you withdraw each year and have nothing remaining at the end of five years? A) $3‚525.62 B) $5‚008.76 C) $3‚408.88 D) $2‚465. 3) If you invest $750 every six months at 8% compounded semi-annually
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Question 1 (5 points) $50 today is worth MORE than $50 tomorrow. Your Answer Score Explanation True ✔ 5.00 Correct. You understand Time value of money. False Total 5.00 / 5.00 Question Explanation We have assumed time value of money is positive. Question 2 (5 points) At an interest rate of 10% it is better to have $100 today than $120 in 2 years. Your Answer Score Explanation True ✔ 5.00 Correct; it is compounding! False Total 5.00 / 5.00 Question
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Time Value of Money Q1. Mr. Sundaram is planning to retire this year. His company can pay him a lump sum retirement payments of Rs 2‚ 00‚000 or Rs 25‚000 life time annuity whichever he chooses. Mr. Sundaram is in good health and estimates to live for at least 20 more years. If his interest rate is 12%‚ which alternative should he choose? Ans Present Value of Annuity 25000*7.469*1.12 = 2‚09‚132 Which is greater than lump sum value of Rs. 2‚00‚000. So Annuity option is better
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the total points for the entire assignment add up to 100. Question 1 (5 points) $100 today is worth the SAME as $100 tomorrow. Your Answer Score Explanation True False Correct 5.00 Correct. You understand time value Total 5.00 / 5.00 Question ExplanationWe have assumed that time value of money is positive. Question 2 (5 points) $100 invested for 10 years at 12% interest is worth more in FV terms than $200 invested for 10 years at 4% interest. Your Answer Score Explanation True Correct 5
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1. Consider a 1-Year $10‚000 CD A. The future value of a $10‚000 CD that has a maturity of 1 year at maturity with 10% interest is $11‚000. Financial Calculator Inputs: $ -10‚000=PV‚ 1=N‚ I=10‚ FV=? ($11‚000) B. The future value of a 1-year‚ $10‚000 CD after one year at an interest rate of 5.0% is $10‚500. Financial Calculator Inputs: $-10‚000=PV‚ 1=N‚ 5=I‚ FV=? ($10‚500) The future value of a 1-year‚ $10‚000 CD after one year at an interest rate of 15.0% is $11‚500. Financial
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A. increasing payments paid for a definitive period of time B. increasing payments paid forever C. equal payments paid at regular intervals over a stated time period D. equal payments paid at regular intervals of time on an ongoing basis E. unequal payments that occur at set intervals for a limited period of time 2. Which one of the following accurately defines a perpetuity? A. a limited number of equal payments paid in even time increments B. payments of equal amounts that are paid irregularly
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are on the board of directors and often are also top managers. In public corporations‚ this is neither feasible for desirable; large‚ public corporations have thousands of shareholders. One reason not all companies incorporate is cost‚ in both time and money‚ of managing the corporation’s legal machinery. A disadvantage for corporations is double taxation. Corporations pay tax on their
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BUSINESS FINANCE FAO: DIRECTORS‚ NATURALLY FRESH PLC CONTENTS Page(s) 1. Introduction 3 2. Required Rate of Return on Equity 3 3. Beta 3 4. Capital Asset Pricing Model 4 5.1 Limitations of CAPM 4 5.2 The APT Model 4 5.3 The Three-Factor Model 4 5.4 Required Rate of Return using APT or Three-Factor 5 Model 5. Bonds 5 6.5 How bond prices are determined
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