Finance true or false (ch 1, 3, 4)

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Ceteris paribus​, as a debtor and for the same annual interest​ rate, you would prefer simple interest to compound interest.

True

FVs represent the amount that an earlier amount will grow into.

True

There are 3 formulas on our formula sheet that contain the variable​ "PMT.

True

We've discussed 3 different multiple cash flow patterns.

True

In a Normal​ Distribution, there is a​ 68% chance that an actual return will exceed the average return plus one standard deviation.

Fasle

We can find the amount needed to pay off a​ fixed-rate fully amortized mortgage loan at any point in time by solving for the PV of the remaining payments.

True

What is​ "discounted" from the FV is the interest part to arrive at the PV.

True

With compound​ interest, interest is earned every period on that​ period's starting amount.

True

Ceteris​ paribus, the FV and the number of periods are inversely related.

False

Compounding is the process used to find a PV.

False

FVs are earlier values and PVs are later values.

False

FVs represent what you need to invest later to have it grow into a specified earlier amount.

False

For a given​ mean, a larger standard deviation means that actual returns that are far from the mean are less likely to occur.

False

We can determine which​ "PMT" we're being asked to solve for by noting what the problem provides in terms of r and n.

False

The goal of the corporate financial manager is to maximize the​ firm's market share.

False

The number of years it would take an investment to double is approximately equal to the annual interest rate divided 72.

False

The principal part of a fixed mortgage loan payment can be found by multiplying the periodic interest rate by the ending balance for a given period.

False

Annuities are unequal cash flows that go on for a finite period of time.

False

"When given the annual withdrawals desired during the retirement​ period, the FVA tells us the amount we should have accumulated by the time we begin the retirement period.

False

A lump sum can be a​ one-time earlier but not a​ one-time later cash flow.

False

According to the Order of​ Operations, exponents are applied before the expression in​ parentheses, and addition and subtraction are to be completed before multiplication and division.

False

The capital budgeting area deals with how the firm should be financed.

False

There are a total of 5 variables in the basic TVM formulas.

False

The​ right-hand side variables in the discount rate formula represent the 3 key factors determining stock prices.

False

To change a decimal value to a​ percent, divide by 100.

False

"PMT" in the PVA formula tells us the periodic mortgage payments for a​ fixed-rate fully amortized loan.

True

A simple percent change represents a change as part of the old or earlier value.

True

For​ fixed-rate fully amortized mortgage​ loans, more of the fixed payment goes towards principal as we approach the end of the loan term.

True

Given the amount needed at the beginning of the retirement​ period, the annual deposits needed during the working period can be found by solving for​ "PMT" in the FVA formula.

True

If the top of a fraction is unchanged and the bottom of a fraction decreases by​ 5%, then the value of the whole fraction would increase by approximately​ 5%.

True

PVs are leftward on a time line and FVs are rightward on the time line.

True

The working capital management area deals with how much of a​ firm's assets should be held in​ cash, inventory and accounts receivable.

True


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