The future value of $5,000 invested today at 3% interest compounded annually for 5 years is A) $5,255. B) $5,520. C) $5,628. D) $5,796. ANSWER D
Date: September 19th, 2020
For mutually exclusive projects the underlying cause of conflicts in ranking for projects by internal rate of return and net present value methods is: A) the reinvestment rate assumption regarding cash flows. B) that neither method explicitly considers the time value of money. C) the assumption made by the IRR method that intermediate cash flows […]
Date: September 19th, 2020
As firms become more leveraged, the risk of insolvency rises because A) the use of debt results in interest payments that cannot be avoided during poor economic conditions. B) bondholders trade lower risk for greater expected returns. C) interest payments on most bonds vary with the level of market rates. D) bondholders are less vigilant […]
Date: September 19th, 2020
Borrowers who anticipate a significant increase in the rate of inflation prefer adjustable-rate mortgages. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
If the calculated NPV is negative, then which of the following must be true? The discount rate used is: A) Equal to the IRR B) Too high C) Greater than the IRR D) Too low E) Less than the IRR ANSWER C
Date: September 19th, 2020
The text discusses the topic of compounding over a large number of compounding periods. To illustrate, it shows that $1,000 invested at 8% for 40 years (annual compounding) grows to $21,724. But if you could earn 10% instead of 8%, you would earn ________ more at the end of 40 years. A) $4,431 B) 25 […]
Date: September 19th, 2020
On a fixed-rate mortgage, the interest paid each month remains the same over the life of the mortgage. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Perhaps the greatest disadvantage of using the IRR method to evaluate investment opportunities is: A) dealing with uncertain cash flows from the project. B) the assumption that all cash flows from the project will be reinvested at the IRR. C) the inability to calculate most IRRs without a computer. D) the need to compare IRR […]
Date: September 19th, 2020
The future value of $12,000 invested today at 6% interest compounded annually for 4 years is A) $23,259. B) $15,150. C) $12,190. D) $9,505. ANSWER B
Date: September 19th, 2020
What is the name for the shifting of non-strategic functions to specialist firms to reduce costs? A) outsourcing B) multinational company C) globalization D) transnational corporations ANSWER Answer: A
Date: September 19th, 2020
