Question

1 Which one of the following generally pays a fixed dividend, receives first pricenity in dividend payment, and maintains the right to a dividend payment, even if that payment is deferred? a. Cumulative common b. Noncumulative common c. Noncumulative preferred d. Cumulative preferred e. Senior common 2 Compound interest: allows for the reinvestment of interest payments b. does not allow for the reinvestment of interest paymernts c. is the same as simple interest d. provides a value that is less than simple interest. e. Both A and D The time value of money concept can be defined as: 3. 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 be received in the future and a dollar today d. the relationship between interest rate stated and amount paid e. None of the above. Discounting cash flows involves a. discounting only those cash flows that occur at least 10 years in the future b. estimating only the cash flows that occur in the first 4 years of a project multiplying expected future cast flows by the cost of capital d. discounting all expected fulare cash Bows to teflect the time valse of money e. taking the cosh discount offered on trads roerchandise c. An annuity a is a debt instrument that pays no interst b. is a stream of payments that varies with cunent mt iot c is a level stream of equal payments through time d. has no value e. None of the above

Answer 1

First 4 questions are being answered here:

1. Option (d) is correct

Cumulative preferred shares pays a fixed dividend, receives first priority in dividend payment, and maintains the right to a dividend payment, even if that payment is deferred.Their dividend gets accumulated if it is not paid in any year.

2.Option (a) is correct

Compound interest allows for the reinvestment of interest payments. It is always more than the simple interest because interest gets compounded every compound period.

3. Option (c) is correct

Time value of money is the relationship between a dollar to be received in the future and a dollar today.

4. Option (d) is correct

Discounting cash flows involves discounting all expected future cash flows to reflect the time value of money. All future expected cash flows are discounted to their present value today.