Ria wants to buy an ordinary annuity that will pay her $4,000 a year for the next 20 years. She expects annual interest rates will be 8 per cent over that time period. The maximum price she would be willing to pay for the annuity is closest to

Finance Quiz

Quiz
•
Business
•
University
•
Hard
USHAKIRAN (Kengeri)
Used 2+ times
FREE Resource
21 questions
Show all answers
1.
MULTIPLE CHOICE QUESTION
45 sec • 2 pts
$32,000.
$39,272.
$40,000.
$80,000.
2.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
In 3 years, you are to receive $5,000. If the interest rate were to suddenly increase, the present value of that future amount to you would
fall.
rise.
remain unchanged.
cannot be determined without more information
3.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
In a typical loan amortization schedule, the dollar amount of interest paid each period ____.
increases with each payment
decreases with each payment
remains constant with each payment
4.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
"Shareholder wealth" in a firm is represented by:
the number of people employed in the firm.
the book value of the firm's assets less the book value of its liabilities.
the amount of salary paid to its employees.
the market price per share of the firm's common stock.
5.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
A(n) would be an example of a principal, while a(n) would be an example of an agent.
shareholder; manager
manager; owner
accountant; bondholder
shareholder; bondholder
6.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
The market price of a share of common stock is determined by:
the board of directors of the firm.
the stock exchange on which the stock is listed.
the president of the company.
individuals buying and selling the stock.
7.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
The cost of equity capital is all of the following EXCEPT:
the minimum rate that a firm should earn on the equity-financed part of an investment.
a return on the equity-financed portion of an investment that, at worst, leaves the market price of the stock unchanged.
by far the most difficult component cost to estimate.
generally lower than the before-tax cost of debt.
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