An annuity will pay eight annual payments of $100, with the first payment to be received one year from now. If the interest rate is 12% per year, what is the present value of this annuity?

Reading 2 - The Time Value of Money in Finance

Quiz
•
Business
•
Professional Development
•
Hard
Tai Nguyen
FREE Resource
38 questions
Show all answers
1.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
$496.76.
$1,229.97.
$556.38.
2.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
A 15-year zero-coupon German government bond has an annualized yield of –1.5%. Assuming annual compounding, the price of the bond per €100 of principal is closest to:
€125.
€115.
€105.
3.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
An investor purchases a stock on January 1. The annual dividend payments for a stock investment for the next four years, beginning on December 31, are $50, $75, $100, and $125. Based on the cash flow additivity principle, the present value of this series of cash flows will be equivalent to the present value of a $50 annuity and the present value of what series of cash flows?
$0, $0, $125, and $125.
$75, $50, $25, and $0.
$0, $25, $50, and $75.
4.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
Wortel Industries has preferred stock outstanding that paying an annual dividend of $3.75 per share. If an investor wants to earn a rate of return of 8.5%, how much should he be willing to pay for a share of Wortel preferred stock?
$31.88.
$44.12.
$42.10.
5.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
A bond pays annual coupon interest of £40 and returns its face value of £1,000 in five years. The bond's yield to maturity is 4.5%. Its price today is closest to:
£946.
£978.
£957.
6.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
An investor purchases a 10-year, $1,000 par value bond that pays annual coupons of $100. If the market rate of interest is 12%, what is the current market value of the bond?
$950.
$887.
$1,124.
7.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
Assuming a constant rate of growth in dividends, we can estimate an equity share's:
dividend yield as the sum of its required rate of return and its growth rate.
growth rate as the sum of its dividend yield and its required rate of return.
required rate of return as the sum of its dividend yield and growth rate.
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