than that same dollar next year. The year-to-year effect may be small when inflation is low, as it is now, but when your investment horizon is measured in decades instead of months, that inflation effect can get very large. If you are not sure what I mean by “large” – just ask your parents (or aunts, uncles, friends who are 15-20 years older than you) how much they paid for a gallon of gas when they were in college. For me, I graduated from college in 1996, and in that year, I usually paid about $1
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the stereotypes and has proven to everyone with will power and with the faith of god, you can accomplish anything. Intro: It’s Feb 14th and the Toronto Raptors are hosting the New York Knicks. It became an exciting game when the Knicks rallied from a 17 point deficit to tie the game at 87 points late in the fourth quarter. With twenty seconds left in the game, Knicks possession, Imran Shupert, who plays Guard position, missed a bank shot, but Tyson Chandler got the rebound and tossed it to Jeremy
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cash flows from that project. Which of the following would cause the project to look more appealing in terms of the present value of those cash flows? a. The discount rate decreases. b. The cash flows are extended over a longer period of time, but the total amount of the cash flows remains the same. c. The discount rate increases. d. Statements b and c are correct. e. Statements a and b are correct. Time value concepts 2. Which of the following statements is most correct? a. A 5-year $100 annuity
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The provisions under a firm’s control are: (1) monitoring and discipline by the board of directors; (2) charter provisions and bylaws that affect the likelihood of hostile takeovers; (3) compensation plans; (4) capital structure choices; and (5) accounting control systems. How does block ownership affect corporate governance? Block ownership occurs when an outside investor owns a large amount (i.e., block) of company’s shares. Large institutional investors, such as CalPERS or TIAA-CREF
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Course | Financial Management | Test | Week 5 Midterm Exam Part 2 | Started | 5/9/16 9:47 PM | Submitted | 5/9/16 11:36 PM | Due Date | 5/10/16 6:00 PM | Status | Completed | Attempt Score | 44 out of 50 points | Time Elapsed | 1 hour, 49 minutes out of 3 hours | Instructions | This exam consist of 25 multiple choice questions and covers the material in Chapters 4 through 7. | Results Displayed | Submitted Answers, Correct Answers, Feedback | * Question 1 2 out of 2 points
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of six years at 9% interest compounded? c. Quarterly ia = (1 + .09/4)4 = .0931 F =5000 (((1.0931)6 – 1)/.0931) = $37,912.07 d. Monthly ia = (1 + .09/12)12 = .0938 F =5000 (((1.0938)6 – 1)/.0938) = $37,979.10 e. Continuously ia = e(.09/12) – 1= .75% F= 5000 (((1.007528)6 – 1)/.007528) = $30570.31 Q3. You borrowed $150,000 with a 30-years payback term and a variable APR that starts at 9% and can be changed every five years
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is usually compounded more frequently than once per year, but annual compounding is assumed here. In other words, the 7 percent will be credited to the account once per year, at the end of the year.) One year later, $70 of interest will be added to the account, making the total balance $1,070. In mathematical terms, this occurrence can be written as follows: if i equals the annual interest rate, then the amount of interest paid in one year equals A times i, where A is the original amount deposited
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Chapter 5 1- You want to find the time value of the annuity below at end of year 3 (t=3). What should you calculate? A) PV of a 4 year annuity due B) FV of a 4 year annuity due C) FV of a 3 year annuity due D) FV of a 4 year ordinary annuity E) FV of a 3 year ordinary annuity 0 1 2 3 4 2- Moe is looking at an annuity that makes five $10,000 payments with the first annuity payment occurring 11 years from today. What is the present value of this annuity if Moe’s interest rate is 9%
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$2,000, which he will continue for the next 20 years. If he can earn an annual compound rate of 8 percent on his deposits, the amount in the account upon retirement will be 98845.84(since it is a retirement plan so, assumed to be annuity due) correct 91,523.93 – ordinary annuity in this accumulation phase. 2. $100 is received at the beginning of year 1, $200 is received at the beginning of year 2, and $300 is received at the beginning of year 3. If these cash flows are deposited at 12 percent
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following would you rather have if your rate of discount is 20 percent? a. $300 in one year b. $350 in two years c. $420 in three years d. $1500 in ten years 2. Suppose the rate of discount is 5 percent, 6 percent, 7 percent, or 8 percent. Suppose that you would rather have $425 in one year instead of $400 today. Also, you would rather have $400 today instead of $445 in two years. What is the rate of discount? a. 5 percent b. 6 percent c. 7 percent d. 8 percent 3. The amount of money you would need
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