Ch. 5 FIN311 Connect
long-term debt
All ___ securities are promises made by the issuing firm to pay principal when due and to make timely interest payments on the unpaid balance
notes, debentures, or bonds
Debt securities are typically called:
B and c.
How to calculate this problem on the calculator: If you invest $100 at 10 percent compounded annually, how much money will you have at the end of 3 years? A. $131.00 B. $133.10 C. $121.00 D. $130.00 and a. Use CF0 b. CPT PV c. CPT FV
present
If you want to know how much you need to invest today at 12 percent compounded annually in order to have $4,000 in five years, you will need to find a(n) _______ value.
greater, larger
Longer-term bonds have (smaller/greater)?interest rate sensitivity because a (smaller/larger)? portion of a bond's value comes from the face amount.
A. r = (1000/100)(1/10) - 1
Suppose present value is $100, future value is $1,000, and N is 10 years. Which formula below is used to find the (decimal) interest rate? A. r = (1000/100)(1/10) - 1 B. r = (1000/100) × (1/10) - 1s C. r = (1000/100) - 1 D. r = 1000 × (1/10) - 1
interest , interest
the idea behind compounding is that ____ is earned on _____
present value
this is the ______ equation = FVt/ (1+r)^t
public-issue and private placed
two major forms of long-term debt
bonds
- a secured debt - long term debt - longer than 10 years term issues are called:
C. Unlike in the financial calculator, you must enter the interest rate in decimal form (0.06) to solve using a spreadsheet. Like in the financial calculator, you must put a negative sign on either the PV or the FV.
Suppose you want to save $10,000 to buy a car. You have $6,000 to deposit today and you can earn 6% on your investments. You want to know when you'll have enough to buy the car. Which of the following spreadsheet functions will solve the problem? A. =NPER(6,0,−6000,10000) B. =NPER(6,0,6000,10000) C. =NPER(0.06,0,−6000,10000) D. =NPER(0.06,0,6000,10000)
present value
The ___ value is the current value of future cash flows discounted at the appropriate discount rate.
maturity
The _____ of a long-term debt instrument is the length of time the debt remains outstanding with some unpaid balance
basic present value
The ____________ equation underlies many of the most important ideas in corporate finance
present value factor
The formula for a _______ is 1/(1+r)^t
compounding
The process of leaving your money and any accumulated interest in an investment for more than one period, thereby reinvesting the interest, is called
long; short; face value; coupon payments
The reason that interest rate risk is greater for ______ term bonds than for ____ term bonds is that the change in rates has a greater effect on the present value of the ______ than on the present value of the ______.
dividend and sales growth
What can be determined using the future value approach to compound growth?
D. and c.
What is the future value of $100 compounded for 50 years at 10 percent annual interest? A. $500.00 B. $14,987.45 C. $868.85 D. $11,739.09 How to calculate this problem on the calculator: a. CF0 b. CPT PV c. CPT FV
D. the same
When the future value formula is used to calculate growth rates, the assumption is that _____ growth rate is achieved each year. A. stair-stepped B. different C. regressing D. the same
debt securities
can be short term (maturities of one year or less) or long-term (maturities of more than one year)
notes
issues with an original maturity of 10 years or less are often called __
future value (FV)
refers to the amount of money an investment will grow to over some period of time at some given interest rate - ___ is the cash value of an investment at some time in the future
unfunded debt
short term debt is sometimes referred to as
Discount rate = RATE(nper, pmt, pv, fv)
spreadsheet function for discount rate
Future value = FV(rate, nper, pmt, pv)
spreadsheet function for future value
Present value = PV(rate, nper, pmt, fv)
spreadsheet function for present value
return
the discount rate is also called the rate of ____
