FI 302 Quiz 2

The number of periods for a consumer loan (n) is equal to the ________. A) number of years times compounding periods per year B) number of years C) number of years in a period D) number of compounding periods

A) number of years times compounding periods per year

26. The value of a financial asset is the ________. A) present value of all of the future cash flows that will be received B) sum of all previous cash flows received C) future value of just the capital gains but not the dividends D) present value of just the capital gains but not the dividends

A) present value of all of the future cash flows that will be received

You can think of the ________ as the "used stock" market because these shares have been owned or "used" previously. A) secondary market B) primary market C) NYSE market D) initial public offering market

A) secondary market

A typical practice of many companies is to distribute part of the earnings to shareholders through ________. A) quarterly stock splits B) quarterly cash dividends C) semiannual cash dividends D) annual stock dividends

B) quarterly cash dividends

To determine the interest paid each compounding period, we take the advertised annual percentage rate and simply divide it by the ________ to get the appropriate periodic interest rate. A) number of compounding periods for the length of an investment B) number of discounting periods for the length of an investment C) number of compounding periods per year D) number of compounding periods per month

C) number of compounding periods per year

A bond may be issued by ________. A) companies B) state governments C) the federal government D) All of the above

D) All of the above

16. Which of the statements below is FALSE? A) The real interest rate is the reward for waiting. B) Nominal interest rates are the sum of two major components: the real interest rate and expected inflation. C) The reward for postponing consumption implies that at the end of the year you will be able to buy more goods. D) The prices of goods and services tend to decrease over time because of inflation.

D) The prices of goods and services tend to decrease over time because of inflation.

Monthly interest on a loan is equal to ________. A) the beginning balance times the APR B) the ending balance times the annual percentage rate C) the ending balance times the periodic interest rate D) the beginning balance times the periodic interest rate

D) the beginning balance times the periodic interest rate

The appropriate rate to use to discount the cash flows of a bond in order to determine the current price is the ________. A) yield to maturity B) coupon rate C) par rate D) current yield

A) yield to maturity

Stocks differ from bonds because: A) bond cash flows are known while stock cash flows are uncertain. B) firms pay bond cash flows prior to paying taxes while stock cash flows are after tax. C) the ending par value of a bond is known at purchase while the ending value of a share of stock is unknown at purchase. D) All of the above

D) All of the above