Finance 2

With an interest-only loan the principal is:

repaid in one lump sum at the end of the loan period

Multiple Choice

You should accept the $200,000 because the payments are only worth $195,413 to you today

A bond that can be paid off early at the issuers discretion is referred to as being which type of bond

callable

The interest earned on both the initial principal and the interest reinvested from prior periods is called

compound interest

The process of determining the present value of future cash flows in order to know their value today is referred to as:

discounted cash flow valuation

An ordinary annuity is best described as:

equal payments paid at the end of regular intervals over a stated time period

DLQ Inc. bonds mature in 12 years and have a coupon rate of 6 percent. If the market rate of interest increases, then the:

market price of the bond will decrease

A bonds principal is repaid on the ______ date

maturity

The Items included in an indenture that limit certain actions of the issuer in order to protect a bondholders interests are referred as

protective covenants

A loan where the borrower receives money today and repays a single lump sum on a future date is called an _____ loan

pure discount

A bond that has only one payment, which occurs at maturity, defines which one of these types of bonds?

zero coupon