BUS 401 Week 2 Quiz - All Questions Answered Correctly

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Question 1.$10,000 will be received exactly 10 years from today. The following statement is true:

  •   If the interest rate increases, so does the present value of the $10,000.   
  •   If the interest rate increases, the present value of the $10,000 decreases.   
  •   It is worth $10,000 today.   
  •   It will have a present value greater than $10,000.   

 

Question 2.We would expect that, all else being equal, investors would pay less for a stock that they view as having become more risky. Assume a stock has just paid a $2.00-per-share dividend. Analysts believe that future dividends will grow at a 14% rate. The constant dividend growth rate is 4%. What would the stock price be?

  •   $14.29   
  •   $20.00   
  •   $20.80   
  •   $28.57   

 

Question 3.Simple interest means that: 

  •   the interest rate is the same every period.   
  •   the dollar amount of interest is the same every period.   
  •   interest is only paid once a year.   
  •   the compounding periods are annual.    

 

Question 4.Which of the following is true of the structure of a zero-coupon bond? 

  •   an annuity of interest payments and a single principal payment at maturity   
  •   no interim interest payments but a variable payment at maturity, depending on interest rates   
  •   an annuity of payments comprised of both interest and principal   
  •   no interim interest payments and a single payment at maturity    

 

Question 5.The cash flows for a perpetuity continue into the future indefinitely. An example of a perpetuity is: 

  •   preferred stock.   
  •   corporate bonds.   
  •   a home mortgage.   
  •   a consumer loan.    

 

Question 6.The name “annuity” suggests annual payments, but in fact we apply the term to: 

  •   any set of payments of the same dollar amount irrespective of timing.   
  •   any set of monthly payments.   
  •   any set of regularly spaced payments of the same dollar amount.   
  •   any set of multiple payments.   

 

Question 7.The payment structure of a corporate bond is best thought of as: 

  •   an annuity of interest payments.   
  •   an annuity of principal and interest payments.   
  •   an annuity of principal payments.   
  •   an annuity of interest payments and a single principal payment at maturity.   

 

Question 8.In an amortized loan: 

  •   the payments are the same every period, but the proportion that is interest increases.   
  •   the payments are the same every period, and the proportion that is interest also is unchanged.
  •   the payments vary every period, but the proportion that is interest doesn’t change.   
  •   the payments are the same every period, but the proportion that is interest decreases.

 

Question 9.In an amortized loan, the principal portion: 

  •   increases with every payment and is zero with the last payment.   
  •   increases with every payment and completely repays the loan with the last payment.   
  •   increases with every payment but at a decreasing rate.   
  •   does not change with every payment.   

 

Question 10.We would expect that, all else being equal, investors would pay more for a stock with a higher dividend growth rate. Assume a stock has just paid a $2.00-per-share dividend. Analysts believe that future dividends will grow at a 6% rate. The required rate of return is 11%. What would the stock price be? 

  •   $29.71   
  •   $31.71   
  •   $40.00   
  •   $42.40   

Need Other Tutorials For BUS 401?

You may click on the links below to go to respective tutorial.

·         BUS 401 Week 1 Assignment ( Financial Management Challenges and Ethics )

·         BUS 401 Week 1 Discussion 1 ( The Role of Financial Management in a Firm )

·         BUS 401 Week 1 Discussion 2 ( Financial Statements )

·         BUS 401 Week 1 Quiz

·         BUS 401 Week 2 Assignment ( Teaching Net Present Value (NPV) and Future Value (FV) )

·         BUS 401 Week 2 Discussion 1 ( Dreams Do Come True )

·         BUS 401 Week 2 Discussion 2 ( Investing in Bonds )

·         BUS 401 Week 2 Journal ( Present and Future Values, and Expected Returns )

·         BUS 401 Week 2 Quiz

·         BUS 401 Week 3 Assignment ( Return on Investment Education Funding )

·         BUS 401 Week 3 Discussion 1 ( Cash Flows From Working )

·         BUS 401 Week 3 Discussion 2 ( Capital Budgeting )

·         BUS 401 Week 3 Quiz

·         BUS 401 Week 4 Assignment ( Identifying and Managing Risk )

·         BUS 401 Week 4 Discussion 1 ( Interviewing Peter Lynch )

·         BUS 401 Week 4 Discussion 2 ( Cost of Capital )

·         BUS 401 Week 4 Journal ( Risk and Return )

·         BUS 401 Week 4 Quiz

·         BUS 401 Week 5 Assignment ( Evaluation of Corporate Performance )

·         BUS 401 Week 5 Discussion 1 ( Ratio Analysis )

·         BUS 401 Week 5 Discussion 2 ( Applying Ratios to a Business )

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