McGraw-Hill OnlineMcGraw-Hill Higher EducationLearning Center
Student Centre | Instructor Centre | Information Centre | Home
S&P Market Insight
S&P Projects
Detailed Index
Appendix 20A
Finance Around the World
CBC Video Cases
Video Clips
Formula Sheet
Technical Support
Learning Objectives
Internet Application Questions
Web Links
Quick Quiz 1
Quick Quiz 2
Part III CBC Video Case
Key Terms & Glossary
Electronic Lecture Notes
Feedback
Help Center


Fundamentals of Corporate Finance, 4/c/e
Fundamentals of Corporate Finance, 4/e
Stephen A. Ross, Massachusetts Institute of Technology
Randolph W. Westerfield, University of Southern California
Bradford D. Jordan, University of Kentucky
Gordon S. Roberts, York University
Discounted Cash Flow Valuation

Quick Quiz 2

After taking this quiz, click 'Submit Answers' for graded results. You'll also have the option of emailing the results to your instructor and/or yourself.



1

The future value interest factor for annuities is calculated as:
A)Future value interest factor + r
B)(1/r) + (future value interest factor*r)
C)(1/r) + future value interest factor
D)(Future value interest factor + 1)/r
E)(Future value interest factor - 1)/r
2

You are considering two perpetuities which are identical in every way, except that perpetuity A will begin making annual payments of $P to you two years from today while the first $P payment for perpetuity B will occur one year from today. It must be true that:
A)the present value of perpetuity A is greater than that of B by $P.
B)the present value of perpetuity B is greater than that of A by $P.
C)the present value of perpetuity B exceeds that of A by the PV of $P for one year.
D)the present value of perpetuity A exceeds that of B by the PV of $P for one year.
E)the present value of perpetuity B is equal to that of perpetuity A.
3

Suppose you are evaluating two annuities. They are identical in every way, except that one is an ordinary annuity and one is an annuity due. Assuming an interest rate of 10%, which of the following is true?
A)The ordinary annuity must have a higher present value than the annuity due.
B)The annuity due must have the same present value as the ordinary annuity.
C)The regular annuity must have a lower future value than the annuity due.
D)The two annuities will differ in present value by the amount of exactly one of the annuity payments.
E)The annuity due will be larger than the regular annuity by an amount equal to the present value of the last annuity payment.
4

What is the present value of the following set of cash flows at an 8% discount rate?
Year 1Year 2Year 3Year 4
Cash Flow$1000-$1000$1000-$1000
A)$0.00
B)$379.41
C)$173.31
D)$127.39
E)$3,312.13
5

What is the future value at the end of year 4 of the following set of cash flows? Assume an interest rate of 8%.
Year 1Year 2Year 3Year 4
Cash Flow$1000-$1000$1000-$1000
A)$173.31
B)$127.38
C)$0.00
D)$379.41
E)$3,312.13
6

Your monthly mortgage payment on your house is $593.90. It is a 30 year mortgage at 7.8% compounded monthly. How much did you borrow?
A)$85,000
B)$82,500
C)$80,000
D)$77,500
E)$75,000
7

What is the effective annual rate of 12% compounded semiannually?
A)11.24%
B)12.00%
C)12.36%
D)12.54%
E)12.96%
8

A given rate is quoted as 8% APR, but has an EAR of 8.33%. What is the rate of compounding during the year?
A)continuously
B)semiannually
C)quarterly
D)monthly
E)annually
9

What is the future value in 10 years of $1,000 payments received at the beginning of each year for the next 10 years? Assume an interest rate of 5.625%.
A)$12,259.63
B)$12,949.23
C)$14,782.15
D)$14,495.48
E)$13,679.45
10

You are going to withdraw $1,000 at the end of each year for the next three years from an account that pays interest at a rate of 8% compounded annually. The account balance will reduce to zero when the last withdrawal is made. How much interest will you earn on the account over the three year life?
A)$0.00
B)$422.90
C)$240.00
D)$576.24
E)$3,000.00




McGraw-Hill/Ryerson




Copyright2002 McGraw-Hill Higher Education
Any use is subject to the Terms of Use and Privacy Policy.
McGraw-Hill Higher Education is one of the many fine businesses of The McGraw-Hill Companies.