罗斯公司理财第四章全英文题库及答案

罗斯公司理财第四章全英文题库及答案

Chapter 04 - Discounted Cash Flow Valuation

Chapter 04 Discounted Cash Flow Valuation Answer Key Multiple Choice Questions

1. An annuity stream of cash flow payments is a set of:

A. level cash flows occurring each time period for a fixed length of time. B. level cash flows occurring each time period forever.

C. increasing cash flows occurring each time period for a fixed length of time. D. increasing cash flows occurring each time period forever.

E. arbitrary cash flows occurring each time period for no more than 10 years.

Difficulty level: Easy Topic: ANNUITY Type: DEFINITIONS

2. Annuities where the payments occur at the end of each time period are called _____, whereas

_____ refer to annuity streams with payments occurring at the beginning of each time period.

A. ordinary annuities; early annuities B. late annuities; straight annuities C. straight annuities; late annuities D. annuities due; ordinary annuities E. ordinary annuities; annuities due

Difficulty level: Easy Topic: ANNUITIES DUE Type: DEFINITIONS

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Chapter 04 - Discounted Cash Flow Valuation 3. An annuity stream where the payments occur forever is called a(n):

A. annuity due. B. indemnity. C. perpetuity.

D. amortized cash flow stream. E. amortization table. Difficulty level: Easy Topic: PERPETUITY Type: DEFINITIONS

4. The interest rate expressed in terms of the interest payment made each period is called the

_____ rate.

A. stated annual interest

B. compound annual interest C. effective annual interest D. periodic interest

E. daily interest

Difficulty level: Easy Topic: STATED INTEREST RATES Type: DEFINITIONS

5. The interest rate expressed as if it were compounded once per year is called the _____ rate.

A. stated interest B. compound interest C. effective annual D. periodic interest E. daily interest

Difficulty level: Easy Topic: EFFECTIVE ANNUAL RATE Type: DEFINITIONS

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Chapter 04 - Discounted Cash Flow Valuation

6. The interest rate charged per period multiplied by the number of periods per year is called the

_____ rate.

A. effective annual B. annual percentage C. periodic interest D. compound interest E. daily interest

Difficulty level: Easy Topic: ANNUAL PERCENTAGE RATE Type: DEFINITIONS

7. Paying off long-term debt by making installment payments is called: A. foreclosing on the debt.

B. amortizing the debt. C. funding the debt. D. calling the debt. E. None of the above.

Difficulty level: Easy Topic: AMORTIZATION Type: DEFINITIONS 8. You are comparing two annuities which offer monthly payments for ten years. Both annuities

are identical with the exception of the payment dates. Annuity A pays on the first of each month

while annuity B pays on the last day of each month. Which one of the following statements is

correct concerning these two annuities? A. Both annuities are of equal value today. B. Annuity B is an annuity due.

C. Annuity A has a higher future value than annuity B. D. Annuity B has a higher present value than annuity A.

E. Both annuities have the same future value as of ten years from today.

Difficulty level: Medium Topic: ORDINARY ANNUITY VERSUS ANNUITY DUE Type: CONCEPTS

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Chapter 04 - Discounted Cash Flow Valuation

9. You are comparing two investment options. The cost to invest in either option is the same today. Both options will provide you with $20,000 of income. Option A pays five annual payments starting with $8,000 the first year followed by four annual payments of $3,000 each. Option B pays five annual payments of $4,000 each. Which one of the following statements is correct given these two investment options?

A. Both options are of equal value given that they both provide $20,000 of income. B. Option A is the better choice of the two given any positive rate of return. C. Option B has a higher present value than

option A given a positive rate of return. D. Option B has a lower future value at year 5 than option A given a zero rate of return. E. Option A is preferable because it is an annuity due.

Difficulty level: Medium Topic: UNEVEN CASH FLOWS AND PRESENT VALUE Type: CONCEPTS

10. You are considering two projects with the following cash flows:

Which of the following statements are true concerning these two projects?

I. Both projects have the same future value at the end of year 4, given a positive rate of return. II. Both projects have the same future value given a zero rate of return. III. Both projects have the same future value at any point in time, given a positive rate of return. IV. Project A has a higher future value than project B, given a positive rate of return. A. II only

B. IV only C. I and III only D. II and IV only E. I, II, and III only

Difficulty level: Medium Topic: UNEVEN CASH FLOWS AND FUTURE VALUE Type: CONCEPTS

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