FINC400
Week 4
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If the inflation premium for a bond goes up, the price of the bond

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


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.


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.


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 firmâ€™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.

Question 9 of 25 
4.0 Points 
The calculation of the cost of capital depends upon historical costs of funds.


Question 10 of 25 
4.0 Points 

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


Question 11 of 25 
4.0 Points 

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


(point) An annuity may be defined as
Reset Selection
As the time period until receipt increases, the present value of an amount at a fixed interest rate
(point) Within the capital asset pricing model
The risk premium is primarily concerned with business risk, financial risk, and inflation risk.
When inflation rises, preferred stock prices fall.


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.


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.


uestion 20 of 25 
4.0 Points 

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


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.


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.


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 aftertax 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% 

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?
