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1、Chapter 04 - Discounted Cash Flow ValuationChapter 04Discounted Cash Flow Valuation Multiple Choice Questions1.An annuity stream of cash flow payments is a set of:A.level cash flows occurring each time period for a fixed length of time.B.level cash flows occurring each time period forever.C.increasi
2、ng cash flows occurring each time period for a fixed length of time.D.increasing cash flows occurring each time period forever.E.arbitrary cash flows occurring each time period for no more than 10 years.2.Annuities where the payments occur at the end of each time period are called _, whereas _ refer
3、 to annuity streams with payments occurring at the beginning of each time period.A.ordinary annuities; early annuitiesB.late annuities; straight annuitiesC.straight annuities; late annuitiesD.annuities due; ordinary annuitiesE.ordinary annuities; annuities due3.An annuity stream where the payments o
4、ccur forever is called a(n):A.annuity due.B.indemnity.C.perpetuity.D.amortized cash flow stream.E.amortization table.4.The interest rate expressed in terms of the interest payment made each period is called the _ rate.A.stated annual interestB.compound annual interestC.effective annual interestD.per
5、iodic interestE.daily interest5.The interest rate expressed as if it were compounded once per year is called the _ rate.A.stated interestB.compound interestC.effective annualD.periodic interestE.daily interest6.The interest rate charged per period multiplied by the number of periods per year is call
6、ed the _ rate.A.effective annualB.annual percentageC.periodic interestD.compound interestE.daily interest7.Paying off long-term debt by making installment payments is called:A.foreclosing on the debt.B.amortizing the debt.C.funding the debt.D.calling the debt.E.None of the above.8.You are comparing
7、two annuities which offer monthly payments for ten years. Both annuities are identical with the exception of the payment dates. Annuity A pays on the first of each month while annuity B pays on the last day of each month. Which one of the following statements is correct concerning these two annuitie
8、s?A.Both annuities are of equal value today.B.Annuity B is an annuity due.C.Annuity A has a higher future value than annuity B.D.Annuity B has a higher present value than annuity A.E.Both annuities have the same future value as of ten years from today.9.You are comparing two investment options. The
9、cost to invest in either option is the same today. Both options will provide you with $20,000 of income. Option A pays five annual payments starting with $8,000 the first year followed by four annual payments of $3,000 each. Option B pays five annual payments of $4,000 each. Which one of the followi
10、ng statements is correct given these two investment options?A.Both options are of equal value given that they both provide $20,000 of income.B.Option A is the better choice of the two given any positive rate of return.C.Option B has a higher present value than option A given a positive rate of retur
11、n.D.Option B has a lower future value at year 5 than option A given a zero rate of return.E.Option A is preferable because it is an annuity due.10.You are considering two projects with the following cash flows:Which of the following statements are true concerning these two projects?I. Both projects
12、have the same future value at the end of year 4, given a positive rate of return.II. Both projects have the same future value given a zero rate of return.III. Both projects have the same future value at any point in time, given a positive rate of return.IV. Project A has a higher future value than p
13、roject B, given a positive rate of return.A.II onlyB.IV onlyC.I and III onlyD.II and IV onlyE.I, II, and III only11.A perpetuity differs from an annuity because:A.perpetuity payments vary with the rate of inflation.B.perpetuity payments vary with the market rate of interest.C.perpetuity payments are
14、 variable while annuity payments are constant.D.perpetuity payments never cease.E.annuity payments never cease.12.Which one of the following statements concerning the annual percentage rate is correct?A.The annual percentage rate considers interest on interest.B.The rate of interest you actually pay
15、 on a loan is called the annual percentage rate.C.The effective annual rate is lower than the annual percentage rate when an interest rate is compounded quarterly.D.When firms advertise the annual percentage rate they are violating U.S. truth-in-lending laws.E.The annual percentage rate equals the effective annual rate when the rate on an account is designated as simple interest.13.Which one of the following statements concerning interest rates is correct?A.The stated rate
