We would expect that all else being equal investors would

Question

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