FINC400 I004 quiz 4

FINC400

Week 4

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Question 1
of 25

4.0 Points

If the inflation premium for a bond goes up, the price of
the bond

A.is unaffected.

B.goes down.

C.goes up.

D.need more information

Question 2
of 25

4.0 Points

The interest factor for the
present value of a single amount is the inverse of the future value interest
factor.

A. True

B. False

Question 3 of 25

4.0
Points

The time value of money is not a
useful concept in determining the value of a bond or in capital investment
decisions.

A. True

B. False

Question 4 of 25

4.0
Points

(point) The longer the time to
maturity:

A.the greater the price increase
from an increase in interest rates.

B.the less the price increase from
an increase in interest rates.

C.the greater the price increase
from a decrease in interest rates.

D.the less the price decrease from a
decrease in interest rates.

Question 5 of 25

4.0 Points

(point) As the interest rate
increases, the interest factor (IF) for the present value of $1 increases.

A. True

B. False

Question 6 of 25

4.0
Points

Financial capital does not
include

A.stock.

B.bonds.

C.preferred stock.

D.working capital.

Question 7 of 25

4.0 Points

The growth rate for the firm’s common stock is 7%. The
firm’s preferred stock is paying an annual dividend of $3. What is the
preferred stock price if the required rate of return is 8%?

A.$3.00

B.$37.50

C.$50.00

D.none of these

Question 8 of 25

4.0
Points

In paying off a mortgage loan,
the amount of the periodic payment that goes toward the reduction of principal
increases over the life of the mortgage.

A. True

B. False

Question
9 of 25

4.0
Points

The calculation of the cost of
capital depends upon historical costs of funds.

A. True

B. False

Question
10 of 25

4.0
Points

(point) The calculation of the
cost of capital depends upon historical costs of funds.

A. True

B. False

Question 11 of 25

4.0
Points

As the interest rate increases,
the interest factor (IF) for the present value of $1 increases.

A. True

B. False

Question
12 of 25

4.0 Points

(point) An annuity may be
defined as

A.a payment at a fixed interest
rate.

B.a series of payments of unequal
amount.

C.a series of yearly payments.

D.a series of consecutive payments
of equal amounts.

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uestion 13 of 25

4.0
Points

As the time period until
receipt increases, the present value of an amount at a fixed interest rate

A.decreases.

B.remains
the same.

C.increases.

D.Not
enough information to tell.

Question 14 of 25

4.0
Points

(point) Within the capital
asset pricing model

A.the
risk-free rate is usually higher than the return in the market.

B.the
higher the beta the lower the required rate of return.

C.beta
measures the volatility of an individual stock relative to a stock market
index.

D.two
of the above are true.

Question 15 of 25

4.0
Points

The risk premium is primarily
concerned with business risk, financial risk, and inflation risk.

A.
True

B.
False

uestion 16 of 25

4.0
Points

When inflation rises, preferred
stock prices fall.

A.
True

B.
False

uestion 17 of 25

4.0
Points

(point) If the inflation premium
for a bond goes up, the price of the bond

A.is
unaffected.

B.goes
down.

C.goes
up.

D.need
more information.

uestion 18 of 25

4.0
Points

The cost of capital for each
source of funds is dependent on current market conditions and expected rates of
return.

A.
True

B.
False

Question 19 of 25

4.0
Points

(point) The time value of money
is not a useful concept in determining the value of a bond or in capital
investment decisions.

A.
True

B.
False

uestion 20 of 25

4.0
Points

The time value of money concept
becomes less critical as the prime rate increases.

A.
True

B.
False

Question
21 of 25

4.0
Points

If a single amount were put on
deposit at a given interest rate and allowed to grow, its future value could be
determined by reference to the future value of $1 table.

A.
True

B.
False

Question 22 of 25

4.0
Points

The risk premium is equal to the
required yield to maturity minus both the real rate of return and the inflation
premium.

A.
True

B.
False

Question 23 of 25

4.0
Points

The required return by investors
is important to financial managers for all of the following reasons except:

A.It
influences the firm’s cost of financing

B.It
influences their stock price

C.It
is the primary driver of their financial ratios

D.It
helps when pricing new issues of securities

uestion 24 of 25

4.0
Points

Lewis, Schultz and Nobel
Development Corp. has an after-tax cost of debt of 4.5 percent. With a tax rate
of 30 percent, what is the yield on the debt?

A.4.41%

B.9.0%

C.1.89%

D.6.43%

Question 25 of 25

4.0
Points

You are to receive $12,000 at
the end of 5 years. The available yield on investments is 6%. Which table
would you use to determine the value of that sum today?

A.Present
value of an annuity of $1

B.Future
value of an annuity

C.Present
value of $1

D.Future
value of $1