FINA Chapter 6

Which of the following should be valued using a perpetuity formula?

1) A consol 2) Preferred Stock 3) Cash flows from a product whose sales are expected to remain constant forever

In almost all multiple cash flow calculations, it is implicitly assumed that the cash flows occur at the _________ of each period.

End

Which of the following are real world examples of annuities?

Pensions and Mortgages

Payday Loan

allows you to borrow now and pay back later

Assume interest is compounded monthly. The ___ annual rate will express this rate as though it were compounded annually

effective

A growing annuity has

finite number of growing cash flows

For a positive stated annual interest rate and multiple compounding periods per year, the EAR is always _____ the APR.

larger than

Compared to a comparable fixed payment loan, the total principle on a fixed principal loan is ____

less

The payment in a ___ amortization loan are not based on the life of the loan

partial