14) The process of adding interest to present (and future) cash flows in order to convert them to their ultimate future value is called a) accumulating. b) capitalizing. c) discounting. d) consolidation. 15) Moving from the future to the present, or from right to left, on a financial timeline is known as a) capitalizing. b) disaggregation. c) discounting. d) weighting. 16) Bo Jackson, Jr. has agreed to play for the Kansas City Royals for $3 million per year for the next 10 years. What table would you use to calculate the value of this contract in today's dollars? a) b) c) d) ANSWER SCO MARK X ONE D Future value of an annuity. Future value of a lump sum. Present value of an annuity. Present value of a lump sum. 7) The pricing of bonds requires calculating a) the present value of the annuity of the future interest payments. b) the present value of the maturity value. c) Both a) and b). d) Neither a) nor b). 3) If the yield to maturity on a bond is higher than the coupon rate, you can assume a) that interest rates have decreased since the bond was issued. b) that the price will be below the par value of the bond. c) that the price will be above the par value of the bond. d) nothing about the price of the bond; more information is needed. ) Which of the following statements is TRUE about the coupon rate of interest? a) It determines how much interest is paid on the bond each period. b) It is the rate that is looked up in present value tables in determining the price of bonds. c) It determines how a bond's cash flows are valued by the market. d) All of these. 78 G

14) The process of adding interest to present (and future) cash flows in order to comvert them to their ultimate future value is talled a) inccumulating b) capitalizing: c) discounting d) consolidation. 15) Moving, from the future to the present, or from right to left, on a fmancial timetine is lonown as a) capitalizing b) disagsregation (c) discounting: d) weighting 16) Bo lackson. Jr. has agreed to play for the Kansas City Royals for $3 million per year for the next 10 years. What table would you use to calculate the value of this contract in today's dollarb? a) Future value of an annuity. b) Future value of a lump sum. c) Present value of an annuity. d) Present value of a lump sum. 7) The pricing of bonds requires calculating a) the present value of the annuity of the future interest payments. b) the present value of the maturity value. c) Both a) and b). d) Neither a) nor b). 3) If the yield to maturity on a bond is higher than the coupon rate, you can assume a) that interest rates have decreased since the bond was issued. b) that the price will be below the par value of the bond. c) that the price will be above the par value of the bond. d) nothing about the price of the bond; more information is needed. Which of the following statements is TRUE about the coupon rate of interest? a) It determines how much interest is paid on the bond each period. b) It is the rate that is looked up in present value tables in determining the price of bonds. c) It determines how a bond's cash flows are valued by the market. d) All of these