Finnace

Excellent Yachting is considering acquiring Turquoise Tours. Management believes Turquoise Tours can generate cash flows of $218,000, $224,000, and $238,000 over the next three years, respectively. After that time, they feel the business will be worthless. If the desired rate of return is 14.5 percent, what is the maximum Excellent Yachting should pay today to acquire Turquoise Coast?

$519,799.59

All else constant, which one of the following will result in the lowest present value of a lump sum? A.8 percent interest for 10 years B.8 percent interest for 5 years C.6 percent interest for 10 years

A 8 percent intrest for 10 years

Which one of the following statements related to annuities and perpetuities is correct?

A perpetuity comprised of $100 monthly payments is worth more than an annuity of $100 monthly payments provided the discount rates are equal.

Price bond declines as an intrest rate (YTM)_____________? A. Increase B. Decrease

A. Increases

Bond pricing equation consists of A.Coupons B.maturity C.par D.yeild to maturity (YTM)

All

corporations selling (issueing) bonds are _________. Investors buying bonds are_______________ A. Lenders, borrowers B.Borrowers, lenders C. Borrowers, shareholders d. savers, shareholders

B. Borrewers, lenders

A discount bond has its coupon rate ______a YTM A. Higher than B. Lower than C.Equal to

B. Lower than

Which one is not one of three key items on a bond contract? A.Par B. Matuirty C.Coupon Rate D.Market intrest rate

D. Market intrest rate

Which one of the following statements correctly defines a time value of money relationship?

Time and present value are inversely related, all else held constant.

Which one of the following statements related to loan interest rates is correct?

When comparing loans you should compare the effective annual rates.

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

compounding

The interest rate that is most commonly quoted by a lender is referred to as the:

annual percentage rate

Cullen invested $5,000 five years ago and earns 6 percent annual interest. By leaving his interest earnings in her account, he increases the amount of interest he earns each year. His investment is best described as benefitting from:

compounding

Madelyn is calculating the present value of a bonus she will receive next year. The process she is using is called:

discounting

The actual interest rate on a loan that is compounded monthly but expressed as an annual rate is referred to as the _____ rate.

effective annual

An ordinary annuity is best defined as:

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

Assume you are investing $100 today in a savings account. Which one of the following terms refers to the total value of this investment one year from now?

future value

Your aunt has promised to give you $5,000 when you graduate from college. You expect to graduate three years from now. If you speed up your plans to enable you to graduate two years from now, the present value of the promised gift will:

increase

Jared invested $100 two years ago at 8 percent interest. The first year, he earned $8 interest on his $100 investment. He reinvested the $8. The second year, he earned $8.64 interest on his $108 investment. The extra $.64 he earned in interest the second year is referred to as:

intrest on intrest

Eunchae invested $2,000 six years ago at 4.5 percent interest. She spends all of her interest earnings immediately so she only receives interest on her initial $2,000 investment. Which type of interest is she earning?

simple interest

A perpetuity is defined as:

unending equal payments paid at equal time intervals.