Homework Answers
23)
Present value of a future cash flow is calculated with the risk adjusted discount rate. If risk increase, risk adjusted discount rate will increase and it leads to reduction of present value.
Hence, given statement is True.
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e True False Question 23 (3 points) There is an inverse relationship between risk and present...
Answer Question 22 (3 points) For an amortized loan with fixed payments (like a mortgage), the...
Answer Question 22 (3 points) For an amortized loan with fixed payments (like a mortgage), the amount of principal reduction increases with each payment. True False Question 23 (3 points) There is an inverse relationship between risk and present value. True False Question 24 (3 points) Saved Which of the following investments would have the lowest present value? Assume that the effective annual rate for all investments is the same and is greater than zero 1) Investment A pays $250...
Question 24 (3 points) Which of the following investments would have the lowest present value? Assume...
Question 24 (3 points) Which of the following investments would have the lowest present value? Assume that the effective annual rate for all investments is the same and is greater than zero. 1) Investment A pays $250 at the end of every year for the next 10 years (a total of 10 payments). 2) Investment B pays $125 at the end of every 6-month period for the next 10 years (a total of 20 payments). 3) Investment C pays $125...
11. True or False (20 points, 2 point each) 23 4567910 No. 1. Marginal cost is...
11. True or False (20 points, 2 point each) 23 4567910 No. 1. Marginal cost is based on the principle that an additional unit of production wiln only entail an increase in the fixed costs and that the variable costs will not be affected 2. The greater the balance you have in your account, the slower your savings will grow 3. In case of capital rationing, we should accept project with the highest positive NPV 4. Interest Rate measures the...
Question 8 (3 points) TRUE or FALSE When using the indirect approach to constructing a Statement...
Question 8 (3 points) TRUE or FALSE When using the indirect approach to constructing a Statement of Cash Flows (this is the only approach taught in FI 3300), an increase in Accounts payable from one accounting period to the next should be added. True False
Question 5 (3 points) The total value of all of your mortgage payments is a present...
Question 5 (3 points) The total value of all of your mortgage payments is a present value True False Question 6 (5 points) All things being equal you can calculate the future value of money through the following equation() Time/Interest * number of compounding periods Interest/compounding periods Time O Principal Interest/compounding period Time all of the above
Please answer both Question 23 (1 point) You are to receive $800 in 5 years. If...
Please answer both
Question 23 (1 point) You are to receive $800 in 5 years. If the discount rate suddenly increases, the present value of the $500 will: O a. Increase b. Decrease 5 c. Stay the same 20 d. Cannot tell Save Question 24 (G point) Question 24 (1 point) An investment pays $500 at the end of every 6 months (semi-annually) for the next 3 years. If the annual interest rate is 12% compounded semi-annually, the present value...
5) Investment E pays $250 at the beginning of every year for the next 10 years...
5) Investment E pays $250 at the beginning of every year for the next 10 years (a total of 10 payments). Question 25 (3 points) A couple decides to purchase a beach condominium in Hilton Head Island, South Carolina. The agreed purchase price will be $298,000. The couple will pay 20% down on the condo and finance the remaining balance with a 30-year mortgage. The terms of the mortgage are 4.80% APR (with monthly compounding). The couple will inherit a...
TRUE AND FALSE I1. True or False (20 points, 2 point each) No. 1. Marginal cost...
TRUE AND FALSE
I1. True or False (20 points, 2 point each) No. 1. Marginal cost is based on the principle that an additional unit of production will only entail an increase in the fixed costs and that the variable costs will not be affected. 2. The greater the balance you have in your account, the slower your savings will grow 3. In case of capital rationing, we should accept project with the highest positive NPV 4. Interest Rate measures...
TRUE AND FALSE I1. True or False (20 points, 2 point each) No. 1. Marginal cost...
TRUE AND FALSE
I1. True or False (20 points, 2 point each) No. 1. Marginal cost is based on the principle that an additional unit of production will only entail an increase in the fixed costs and that the variable costs will not be affected. 2. The greater the balance you have in your account, the slower your savings will grow 3. In case of capital rationing, we should accept project with the highest positive NPV 4. Interest Rate measures...
Answer Question 22 (3 points) For an amortized loan with fixed payments (like a mortgage), the amount of principal reduction increases with each payment. True False Question 23 (3 points) There is an inverse relationship between risk and present value. True False Question 24 (3 points) Saved Which of the following investments would have the lowest present value? Assume that the effective annual rate for all investments is the same and is greater than zero 1) Investment A pays $250...
Question 24 (3 points) Which of the following investments would have the lowest present value? Assume that the effective annual rate for all investments is the same and is greater than zero. 1) Investment A pays $250 at the end of every year for the next 10 years (a total of 10 payments). 2) Investment B pays $125 at the end of every 6-month period for the next 10 years (a total of 20 payments). 3) Investment C pays $125...
11. True or False (20 points, 2 point each) 23 4567910 No. 1. Marginal cost is based on the principle that an additional unit of production wiln only entail an increase in the fixed costs and that the variable costs will not be affected 2. The greater the balance you have in your account, the slower your savings will grow 3. In case of capital rationing, we should accept project with the highest positive NPV 4. Interest Rate measures the...
Question 8 (3 points) TRUE or FALSE When using the indirect approach to constructing a Statement of Cash Flows (this is the only approach taught in FI 3300), an increase in Accounts payable from one accounting period to the next should be added. True False
Question 5 (3 points) The total value of all of your mortgage payments is a present value True False Question 6 (5 points) All things being equal you can calculate the future value of money through the following equation() Time/Interest * number of compounding periods Interest/compounding periods Time O Principal Interest/compounding period Time all of the above
Please answer both
Question 23 (1 point) You are to receive $800 in 5 years. If the discount rate suddenly increases, the present value of the $500 will: O a. Increase b. Decrease 5 c. Stay the same 20 d. Cannot tell Save Question 24 (G point) Question 24 (1 point) An investment pays $500 at the end of every 6 months (semi-annually) for the next 3 years. If the annual interest rate is 12% compounded semi-annually, the present value...
5) Investment E pays $250 at the beginning of every year for the next 10 years (a total of 10 payments). Question 25 (3 points) A couple decides to purchase a beach condominium in Hilton Head Island, South Carolina. The agreed purchase price will be $298,000. The couple will pay 20% down on the condo and finance the remaining balance with a 30-year mortgage. The terms of the mortgage are 4.80% APR (with monthly compounding). The couple will inherit a...
TRUE AND FALSE
I1. True or False (20 points, 2 point each) No. 1. Marginal cost is based on the principle that an additional unit of production will only entail an increase in the fixed costs and that the variable costs will not be affected. 2. The greater the balance you have in your account, the slower your savings will grow 3. In case of capital rationing, we should accept project with the highest positive NPV 4. Interest Rate measures...
TRUE AND FALSE
I1. True or False (20 points, 2 point each) No. 1. Marginal cost is based on the principle that an additional unit of production will only entail an increase in the fixed costs and that the variable costs will not be affected. 2. The greater the balance you have in your account, the slower your savings will grow 3. In case of capital rationing, we should accept project with the highest positive NPV 4. Interest Rate measures...
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