Corporate Finance Quiz

If the nominal rate of interest is 10% per annum and there is quarterly compounding, the effective rate of interest will be:

• 10% per annum

• 10.10 per annum

• 10.25%per annum

• 10.38% per annum

Relationship between annual nominal rate of interest and annual effective rate of interest, if frequency of compounding is greater than one:

• Effective rate > Nominal rate

• Effective rate < Nominal rate

• Effective rate = Nominal rate

• None of the above

Time value of money indicates that

• A unit of money obtained today is worth more than a unit of money obtained in future

• A unit of money obtained today is worth less than a unit of money obtained in future

• There is no difference in the value of money obtained today and tomorrow

• None of the above

What is the present value of a $1,000 ordinary annuity that earns 8% annually for an infinite number of periods?

• $80

• $800

• $1000

• $12,500

You expect to deposit the following cash flows at the end of years 1 through 5, $1,000; $4,000; $9,000; $5,000; and $2,000 respectively. What is the future account value at the end of year 6 if you can earn 10% compounded annually?

• $15,633.62

• $21,000

• $25,178.10

• $27,695.91

How much of money Mr X has to deposit in the bank today if he wants to gets VND 300 m after 5 years. Assume that the interest rate is 10%pa?

• VND 186 m

• VND 300 m

• VND 450 m

• VND 330 m

If today you put VND 10m in a savings account in a bank at the stated annual interest rate of 12%. How much interest payment will you receive after 5 years when the bank pays interest semi-annually?

• VND 1,338 m

• VND 17,623 m

• VND 7,910 m

• VND 1,689 m

Today you deposit VND 100 m in the bank and expect to receive VND 112 m next year. If the inflation is expected at the rate of 5% for the coming year, what is the real interest rate of this investment?

• 12%

• 5%

• 6.67%

• 19%

The beta of stock A is 1.5. Which of the following statement is true?

• The standard deviation of the return of stock A is 1.5

• The expected return on the stock A is equal to the expected return on the market

• The return of the stock A are magnified 1.5 times over those of the market

• The expected return of the stock A is 1.5 higher than the expected return of the market

Correlation coefficient between A and B equal 1. Which of the following statement is true?

• Return of A and B are perfectly positively correlated

• Both return of A and B are higher than the average at the same time

• The covariance of two securities is 1

• Return of A is higher than the average while return of B is lower than the average