羅斯公司理財(cái)Chap004全英文題庫(kù)及答案

1、Chapter 04 Discounted Cash Flow ValuationAnswer KeyMultiple Choice Questions1. An annuity stream of cash flow payments is a set of:A level cash flows occurring each time period for a fixed length of time.B. level cash flows occurring each time period forever.C. increasing cash flows occurring each t

2、ime period for a fixed length of time.D. increasing cash flows occurring each time period forever.E. arbitrary cash flows occurring each time period for no more than 10 years.Difficulty level: EasyTopic: ANNUITYType: DEFINITIONS2. Annuities where the payments occur at the end of each time period are

3、 called, whereas refer to annuity streams with payments occurring at the beginning of each time period.A. ordinary annuities; early annuitiesB. late annuities; straight annuitiesC. straight annuities; late annuitiesD. annuities due; ordinary annuitiesE. ordinary annuities; annuities dueDifficulty le

4、vel: Easy Topic: ANNUITIES DUE Type: DEFINITIONS3. An annuity stream where the payments occur forever is called a(n):A. annuity due.B. indemnity.C. perpetuity.D. amortized cash flow stream.E. amortization table.Difficulty level: EasyTopic: PERPETUITYType: DEFINITIONS4. The interest rate expressed in

5、 terms of the interest payment made each period is called the rate.A stated annual interestB. compound annual interestC. effective annual interestD. periodic interestE. daily interestDifficulty level: EasyTopic: STATED INTEREST RATESType: DEFINITIONS5. The interest rate expressed as if it were compo

6、unded once per year is called the rate.A. stated interestB. compound interestC. effective annualD. periodic interestE. daily interestDifficulty level: EasyTopic: EFFECTIVE ANNUAL RATEType: DEFINITIONS6. The interest rate charged per period multiplied by the number of periods per year is called the r

7、ate.A. effective annualB. annual percentageC. periodic interestD. compound interestE. daily interestDifficulty level: EasyTopic: ANNUAL PERCENTAGE RATEType: DEFINITIONS7. Paying off long-term debt by making installment payments is called:A. foreclosing on the debt.B. amortizing the debt.C. funding t

8、he debt.D. calling the debt.E. None of the above.Difficulty level: EasyTopic: AMORTIZATIONType: DEFINITIONS8. You are comparing two annuities which offer monthly payments for ten years. Both annuities are identical with the exception of the payment dates. Annuity A pays on the first of each month wh

9、ile annuity B pays on the last day of each month. Which one of the following statements is correct concerning these two annuities?A. Both annuities are of equal value today.B. Annuity B is an annuity due.C. Annuity A has a higher future value than annuity B.D. Annuity B has a higher present value th

10、an annuity A.E. Both annuities have the same future value as of ten years from today.Difficulty level: MediumTopic: ORDINARY ANNUITY VERSUS ANNUITY DUEType: CONCEPTS9. You are comparing two investment options. The cost to invest in either option is the same today. Both options will provide you with

11、$20,000 of income. Option A pays five annual payments starting with $8,000 the first year followed by four annual payments of $3,000 each. Option B pays five annual payments of $4,000 each. Which one of the following statements is correct given these two investment options?A. Both options are of equ

12、al value given that they both provide $20,000 of income.B. Option A is the better choice of the two given any positive rate of return.C. Option B has a higher present value than option A given a positive rate of return.D. Option B has a lower future value at year 5 than option A given a zero rate of

13、 return.E. Option A is preferable because it is an annuity due.Difficulty level: MediumTopic: UNEVEN CASH FLOWS AND PRESENT VALUEType: CONCEPTS10. You are considering two projects with the following cash flows:Project AProject BYear 1$2,500$4,000Year 23,500Year 33,5003,00044,0002.500Which of the fol

14、lowing statements are true concerning these two projects?1. Both projects have the same future value at the end of year 4, given a positive rate of return.11. Both projects have the same future value given a zero rate of return.111. Both projects have the same future value at any point in time, give

15、n a positive rate of return.112. Project A has a higher future value than project B, given a positive rate of return.A II onlyB. IV onlyC. I and III onlyD. II and IV onlyE. I, II, and III onlyDifficulty level: MediumTopic: UNEVEN CASH FLOWS AND FUTURE VALUEType: CONCEPTS11. A perpetuity differs from

16、 an annuity because:A. perpetuity payments vary with the rate of inflation.B. perpetuity payments vary with the market rate of interest.C. perpetuity payments are variable while annuity payments are constant.D. perpetuity payments never cease.E. annuity payments never cease.Difficulty level: EasyTop

17、ic: PERPETUITY VERSUS ANNUITYType: CONCEPTS12. Which one of the following statements concerning the annual percentage rate is correct?A. The annual percentage rate considers interest on interest.B. The rate of interest you actually pay on a loan is called the annual percentage rate.C. The effective

18、annual rate is lower than the annual percentage rate when an interest rate is compounded quarterly.D. When firms advertise the annual percentage rate they are violating U.S. truth-in-lending laws.E. The annual percentage rate equals the effective annual rate when the rate on an account is designated

19、 as simple interest.Difficulty level: MediumTopic: ANNUAL PERCENTAGE RATEType: CONCEPTS13. Which one of the following statements concerning interest rates is correct?A. The stated rate is the same as the effective annual rate.B. An effective annual rate is the rate that applies if interest were char

20、ged annually.C. The annual percentage rate increases as the number of compounding periods per year increases.D. Banks prefer more frequent compounding on their savings accounts.E. For any positive rate of interest, the effective annual rate will always exceed the annual percentage rate.Difficulty le

21、vel: Medium Topic: INTEREST RATES Type: CONCEPTS14. Which of the following statements concerning the effective annual rate are correct?I. When making financial decisions, you should compare effective annual rates rather than annual percentage rates.J. . The more frequently interest is compounded, th

22、e higher the effective annual rate.K. I. A quoted rate of 6% compounded continuously has a higher effective annual rate than if the rate were compounded daily.L. . When borrowing and choosing which loan to accept, you should select the offer with the highest effective annual rate.M. I and II onlyN.

23、I and IV onlyO. I, II, and III onlyP. II, III, and IV onlyQ. I, II, III, and IVDifficulty level: MediumTopic: EFFECTIVE ANNUAL RATEType: CONCEPTS15. The highest effective annual rate that can be derived from an annual percentage rate of 9% is computed as:A. .09e - 1.B. e.09 q.C. e (1 + .09).D. e.09

24、- 1.E. (1 + .09)q.Difficulty level: MediumTopic: CONTINUOUS COMPOUNDINGType: CONCEPTS16. The time value of money concept can be defined as:A. the relationship between the supply and demand of money.B. the relationship between money spent versus money received.C. the relationship between a dollar to

25、be received in the future and a dollar today.D. the relationship between interest rate stated and amount paid.E. None of the above.Difficulty level: Easy Topic: TIME VALUE Type: CONCEPTS17. Discounting cash flows involves:A. discounting only those cash flows that occur at least 10 years in the futur

26、e.B. estimating only the cash flows that occur in the first 4 years of a project.C. multiplying expected future cash flows by the cost of capital.D. discounting all expected future cash flows to reflect the time value of money.E. taking the cash discount offered on trade merchandise.Difficulty level

27、: EasyTopic: CASH FLOWSType: CONCEPTS18. Compound interest:A. allows for the reinvestment of interest payments.B. does not allow for the reinvestment of interest payments.C. is the same as simple interest.D. provides a value that is less than simple interest.E. Both A and D.Difficulty level: EasyTop

28、ic: INTERESTType: CONCEPTS19. An annuity:A. is a debt instrument that pays no interest.B. is a stream of payments that varies with current market interest rates.C. is a level stream of equal payments through time.D. has no value.E. None of the above.Difficulty level: EasyTopic: ANNUITY Type: CONCEPT

29、S20. The stated rate of interest is 10%. Which form of compounding will give the highest effective rate of interest?A. annual compoundingB. monthly compoundingC. daily compoundingD. continuous compoundingE. It is impossible to tell without knowing the term of the loan.Difficulty level: EasyTopic: CO

30、MPOUNDINGType: CONCEPTS21. The present value of future cash flows minus initial cost is called:A. the future value of the project.B. the net present value of the project.C. the equivalent sum of the investment.D. the initial investment risk equivalent value.E. None of the above.Difficulty level: Eas

31、y Topic: PRESENT VALUE Type: CONCEPTS22. Find the present value of $5,325 to be received in one period if the rate is 6.5%. A $5,000.00B. $5,023.58C. $5,644.50D. $5,671.13 E. None of the above.EnterI 6,55325N I/Y PV FMT HVSolve forDifficulty level: EasyTopic: PRESENT VALUE - SINGLE SUMType: PROBLEMS

32、23. If you have a choice to earn simple interest on $10,000 for three years at 8% or annually compounded interest at 7.5% for three years which one will pay more and by how much?A. Simple interest by $50.00B. Compound interest by $22.97C. Compound interest by $150.75D. Compound interest by $150.00E.

33、 None of the above.Simple Interest = $10,000 (.08)(3) = $2,400;Compound Interest = $10,000(1.0753 - 1) = $2,422.97;Difference = $2,422.97 - $2,400 = $22.97Difficulty level: EasyTopic: SIMPLE & COMPOUND INTERESTType: PROBLEMS24. Bradley Snapp has deposited $7,000 in a guaranteed investment accoun

34、t with a promised rate of 6% compounded annually. He plans to leave it there for 4 full years when he will make a down payment on a car after graduation. How much of a down payment will he be able to make?A. $1,960.00B. $2,175.57C. $8,960.00D. $8,837.34E. $9,175.57 $7,000 (1.06)4 = $8,837.34Difficul

35、ty level: EasyTopic: FUTURE VALUE - SINGLE SUM Type: PROBLEMS25. Your parents are giving you $100 a month for four years while you are in college. At a 6% discount rate, what are these payments worth to you when you first start college?A. $3,797.40B. $4,167.09C. $4,198.79D. $4,258.03E. $4,279.32Ente

36、ra尸尸= $100 = S100 x 4U03 = IM,2s也034 <126/12歡迎下載51N I/Y PV PMT FSolve for-4,258.03Difficulty level: EasyTopic: ORDINARY ANNUITY AND PRESENT VALUEType: PROBLEMSIf26. You just won the lottery! As your prize you will receive $1,200 a month for 100 months. you can earn 8% on your money, what is this

37、prize worth to you today?A. $87,003.69B $87,380.23C. $87,962.77D. $88,104.26APV = $1,200E. $90,723.76$1,200 x 72.816858 = $87380.23Eiile110(1NSolve for8/121,200I/Y PV PMT FV-87,380.23Difficulty level: EasyTopic: ORDINARY ANNUITY AND PRESENT VALUEType: PROBLEMS27. Todd is able to pay $160 a month for

38、 five years for a car. If the interest rate is 4.9%, how much can Todd afford to borrow to buy a car?A. $6,961.36B $8,499.13C. $8,533.84D. $8,686.82E. $9,588.05.049J 卜=$16Q X 53.11957 =甌99.1312EnUrSolve for5x12N4.9/12I/Y PV8,499.13-16(1 PMT FVDifficulty level: EasyTopic: ORDINARY ANNUITY AND PRESENT

39、 VALUEType: PROBLEMS28. You are the beneficiary of a life insurance policy. The insurance company informs you that you have two options for receiving the insurance proceeds. You can receive a lump sum of $50,000 today or receive payments of $641 a month for ten years. You can earn 6.5% on your money

40、. Which option should you take and why?A. You should accept the payments because they are worth $56,451.91 today.B. You should accept the payments because they are worth $56,523.74 today.C. You should accept the payments because they are worth $56,737.08 today.D. You should accept the $50,000 becaus

41、e the payments are only worth $47,757.69 today.E. You should accept the $50,000 because the payments are only worth $47,808.17 today.JPrr = $641x1.065iT=$641 x S8.0685 = !R56,451.91Enter 10xL26.5/12641FN LY r*V PMTSolve for-56,451,91Difficulty level: MediumTopic: ORDINARY ANNUITY AND PRESENT VALUETy

42、pe: PROBLEMS29. Your employer contributes $25 a week to your retirement plan. Assume that you work for your employer for another twenty years and that the applicable discount rate is 5%. Given these assumptions, what is this employee benefit worth to you today?A. $13,144.43B. $15,920.55C. $16,430.54

43、D. $16,446.34.05E. $16,519.02=狙5 x 657.2215 = $16,430.54I/Y PV PMT F-16.43IK54Difficulty level: MediumTopic: ORDINARY ANNUITY AND PRESENT VALUEType: PROBLEMS30. You have a sub-contracting job with a local manufacturing firm. Your agreement calls for annual payments of $50,000 for the next five years

44、. At a discount rate of 12%, what is this job worth to you today?A. $180,238.81B. $201,867.47C. $210,618.19D. $223,162.58E. $224,267.10APV = $50,000 x « I - 'I2. »= $50,000 x 3.6047762 = $180/*£1Enter 51250.00ftSolve forI/V PV PMT HV -180,238.81Difficulty level: MediumTopic: ORDIN

45、ARY ANNUITY AND PRESENT VALUEType: PROBLEMS31. The Ajax Co. just decided to save $1,500 a month for the next five years as a safety net for recessionary periods. The money will be set aside in a separate savings account which pays 3.25% interest compounded monthly. It deposits the first $1,500 today

46、. If the company had wanted to deposit an equivalent lump sum today, how much would it have had to deposit?A. $82,964.59B $83,189.29C. $83,428.87D. $83,687.23E. $84,998.011- 1 (1 +AV = $1,500 x ;白 325 9), L2,032?12(,0325-x 1 +12=$1,500 x 55.3(因72726 x 1.OO27QN333EnterSolve for5x12 3.25/12 -lt500BGN

47、N I/Y PV PMT FV83J89.29Difficulty level: MediumTopic: ANNUITY DUE AND PRESENT VALUEType: PROBLEMS32. You need some money today and the only friend you have that has any is your' miifriend. He agrees to loan you the money you need, if you make payments of $20 a month for the next six months. In k

48、eeping with his reputation, he requires that the first payment be paid today.He also charges you 1.5% interest per month. How much money are you borrowing?A. $113.94B $115.65C. $119.34D. $119.63E. $119.96AdlJyV = $20 x，- I "+ 01，） 十（”5）= $2琳 x 5.697187165 x 1*15 = $115.65 ,015Enle6國(guó)Solve forL5-

49、20BGNI/YPV PMTFVIIS.6sDifficulty level: MediumTopic: ANNUITY DUE AND PRESENT VALUEType: PROBLEMS33. You buy an annuity which will pay you $12,000 a year for ten years. The payments are paid on the first day of each year. What is the value of this annuity today at a 7% discount rate?A. $84,282.98B. $

50、87,138.04C. $90,182.79D $96,191.91E. $116,916.21= $12,000L' o,-LJ 卜乂口 + 07) = 512,000 x 7.025582 x 1.07 = $90,182,79Enter 107L2,OOOBGNSohe forPV PMT FV -90482.79Difficulty level: MediumTopic: ANNUITY DUE AND PRESENT VALUEType: PROBLEMS34. You are scheduled to receive annual payments of $10,000 f

51、or each of the next 25 years. Your discount rate is 8.5%. What is the difference in the present value if you receive these payments at the beginning of each year rather than at the end of each year?A. $8,699B. $9,217C. $9,706D. $10,000E. $10,850i _ I/ri i 085產(chǎn)API7 = $10,000x 1“ =$10,000 x 10.234191

52、=$102,341.91】085 JEnter 25 WS10T000N I/Y PV PMT FVSolve tor_102,34191"f打1卜(1+ 085)= $10,000 x 10.234191 x 1.085 = $111,040.97Enter 2?NSolve for&S10.000BGNI/Y PV PMT FV -111,040.97Difference = $111,040.97 - $102,341.91 = $8,699.06 = $8,699 (rounded)Note: The difference = .085 $102,341.91 = $

53、8,699.06Difficulty level: MediumTopic: ORDINARY ANNUITY VERSUS ANNUITY DUEType: PROBLEMS35. You are comparing two annuities with equal present values. The applicable discount rate is 7.5%. One annuity pays $5,000 on the first day of each year for twenty years. How much does the second annuity pay ea

54、ch year for twenty years if it pays at the end of each year?A. $4,651B. $5,075C. $5,000D. $5,375E $5,405x 10194491 x 1.075 = S54J9539AdufV = $5,000xJx(l+.07S)= $5,000EnterSolve for207.5 5,OOOBGNN I/Y PV PMT FV -54,795.39$54.795G9 =01-1Q + .O75)呼,075Enter 20NSolve for7.5 54,795.39UY PV PMT FT-5 Q75Be

55、cause each payment is received one year later, then the cash flow has to equal: $5,00p + .075) = $5,375Difficulty level: MediumTopic: ORDINARY ANNUITY VERSUS ANNUITY DUEType: PROBLEMS36. Martha receives $100 on the first of each month. Stewart receives $100 on the last day of each month. Both Martha

56、 and Stewart will receive payments for five years. At an 8% discount rate, what is the difference in the present value of these two sets of payments?A. $32.88B. $40.00C. $99.01D. $108.00E. $112.50i- 1/(14,、v i7ffno >=$100 X 49.318409 x 1.006667 = $4,964.724/1= $ioox一薩一J x| i + I 12 ITEnterSolve for5x12 N/12 UHIBGN N I/Y PV PR IT FV-4,964,72x 49.318409 =Solve forT93L84S4t93L84Difference = $4,964.72 - $4,931.84 = $32.88r 0 g、Note: Difference = $4.931,84x = $32.88U2 JDif