UNIT 2 - MILESTONE 2 114 SUBMIT MILESTONE Question 1 O Mark this question Here are all the tutorials from Unit 2. Use them as needed throughout the Unit 2 Milestone. Which of the following is true for calculating the future value of multiple cash flows? O You can only find the FV of multiple cash flows if they all have the same interest rate. UNIT 2 TUTORIALS 2.1 Time Value of Cash Flows O O To find the FV of multiple annuities, multiply the sum of all the present values by the 2.1.1 Introduction to the Time Value of Money interest rate plus time period. 2.1.2 Future Value, Single Cash Flows O It is more complex to find the FV of annuities than the FV of irregular cash flows. 2.1.3 Present Value, Single Cash Flows If the cash flows aren't uniform, you must find the FV of each cash flow and then add 2.1.4 Annulties O them together. 2.1.5 Valuing Multiple Cash Flows 2.1.6 Additional Detail on Present and Future Values SAVE & CONTINUE 2.1.7 Yield Report an issue with this question 2.2 Bond Valuation O 2.2.1 The Basics of Interest Rates 2.2.2 Understanding Bonds 2.2.3 Key Characteristics of Bonds 2.2.4 Advantages and Disadvantages of Bonds 2.2.5 Types of Bonds 2.2.6 Valuing BondsUNIT 2 - MILESTONE 2 114 SUBMIT MILESTONE Question 2 O Mark this question Here are all the tutorials from Unit 2. Use them as needed throughout the Unit 2 Milestone. Select the true statement about default risk. O Bondholders are guaranteed to be repaid in full if a company enters bankruptcy. UNIT 2 TUTORIALS 2.1 Time Value of Cash Flows O O Default risk relates to a bond's periodic coupon payments, but not to its maturity 2.1.1 Introduction to the Time Value of Money payment. 2.1.2 Future Value, Single Cash Flows O It is the risk that the bond's price will fall below its par value. 2.1.3 Present Value, Single Cash Flows Bondholders have a degree of legal protection against default risk, but it is not 2.1.4 Annuities O comprehensive. 2.1.5 Valuing Multiple Cash Flows 2.1.6 Additional Detail on Present and Future Values SAVE & CONTINUE 2.1.7 Yield Report an issue with this question 2.2 Bond Valuation O 2.2.1 The Basics of Interest Rates 2.2.2 Understanding Bonds 2.2.3 Key Characteristics of Bonds 2.2.4 Advantages and Disadvantages of Bonds 2.2.5 Types of Bonds javascript:void(0); 2.2.6 Valuing BondsUNIT 2 - MILESTONE 2 114 SUBMIT MILESTONE Question 3 O Mark this question Here are all the tutorials from Unit 2. Use them as needed throughout the Unit 2 Milestone. Chen purchased a 30-year corporate bond in 2018 that promised to pay him 4% interest semi-annually for the life of the loan. The corporation reserved the right to redeem the bond in 2038. UNIT 2 TUTORIALS Which of those numbers represents the bond's call feature? 2.1 Time Value of Cash Flows O 2.1.1 Introduction to the Time Value of Money O 2018 2.1.2 Future Value, Single Cash Flows O 30 2.1.3 Present Value, Single Cash Flows 2.1.4 Annulties O 4 2.1.5 Valuing Multiple Cash Flows O 2038 2.1.6 Additional Detail on Present and Future Values 2.1.7 Yield SAVE & CONTINUE 2.2 Bond Valuation O 2.2.1 The Basics of Interest Rates Report an Issue with this question 2.2.2 Understanding Bonds 2.2.3 Key Characteristics of Bonds 2.2.4 Advantages and Disadvantages of Bonds 2.2.5 Types of Bonds javascript:void(0); 2.2.6 Valuing BondsUNIT 2 - MILESTONE 2 114 SUBMIT MILESTONE Question 4 O Mark this question Here are all the tutorials from Unit 2. Use them as needed throughout the Unit 2 Milestone. Preemptive rights allow stockholders to acquire before the general public. O company assets UNIT 2 TUTORIALS 2.1 Time Value of Cash Flows O new stock 2.1.1 Introduction to the Time Value of Money O 2.1.2 Future Value, Single Cash Flows preexisting shares 2.1.3 Present Value, Single Cash Flows O dividends 2.1.4 Annulties 2.1.5 Valuing Multiple Cash Flows SAVE & CONTINUE 2.1.6 Additional Detail on Present and Future Values 2.1.7 Yield Report an Issue with this question 2.2 Bond Valuation O 2.2.1 The Basics of Interest Rates 2.2.2 Understanding Bonds 2.2.3 Key Characteristics of Bonds 2.2.4 Advantages and Disadvantages of Bonds 2.2.5 Types of Bonds javascript:void(0); 2.2.6 Valuing BondsUNIT 2 - MILESTONE 2 114 SUBMIT MILESTONE Question 5 O Mark this question Here are all the tutorials from Unit 2. Use them as needed throughout the Unit 2 Milestone. Which descriptor relates to the asset-based approach for valuing corporations? O Analyzes what the company owns UNIT 2 TUTORIALS 2.1 Time Value of Cash Flows O O Considers the weighted average cost of capital 2.1.1 Introduction to the Time Value of Money O Multiplies the share price by number of shares outstanding 2.1.2 Future Value, Single Cash Flows 2.1.3 Present Value, Single Cash Flows O Involves an analysis of risk 2.1.4 Annulties 2.1.5 Valuing Multiple Cash Flows SAVE & CONTINUE 2.1.6 Additional Detail on Present and Future Values 2.1.7 Yield Report an Issue with this question 2.2 Bond Valuation O 2.2.1 The Basics of Interest Rates 2.2.2 Understanding Bonds 2.2.3 Key Characteristics of Bonds 2.2.4 Advantages and Disadvantages of Bonds 2.2.5 Types of Bonds 2.2.6 Valuing BondsUNIT 2 - MILESTONE 2 114 SUBMIT MILESTONE Question 6 O Mark this question Here are all the tutorials from Unit 2. Use them as needed throughout the Unit 2 Milestone. Select the statement that is true of preferred stock. O Owners of preferred stock have more voting rights than owners of common stock. UNIT 2 TUTORIALS 2.1 Time Value of Cash Flows O O Preferred stock is generally thought to be more risky than common stock. 2.1.1 Introduction to the Time Value of Money O Preferred stock is not considered equity. 2.1.2 Future Value, Single Cash Flows 2.1.3 Present Value, Single Cash Flows O Owners of preferred stock have a stronger claim to a company's assets than owners of common stock. 2.1.4 Annulties 2.1.5 Valuing Multiple Cash Flows 2.1.6 Additional Detail on Present and Future Values SAVE & CONTINUE 2.1.7 Yield Report an issue with this question 2.2 Bond Valuation O 2.2.1 The Basics of Interest Rates 2.2.2 Understanding Bonds 2.2.3 Key Characteristics of Bonds 2.2.4 Advantages and Disadvantages of Bonds 2.2.5 Types of Bonds javascript:void(0); 2.2.6 Valuing BondsUNIT 2 - MILESTONE 2 114 SUBMIT MILESTONE Question 7 O Mark this question Here are all the tutorials from Unit 2. Use them as needed throughout the Unit 2 Milestone. Select the statement that correctly explains the relationship between Interest rates and present or future value. UNIT 2 TUTORIALS Assuming other variables stay the same, if the interest rate decreases, the present O 2.1 Time Value of Cash Flows O value of an investment decreases. 2.1.1 Introduction to the Time Value of Money O Assuming other variables stay the same, if the interest rate increases, the future value 2.1.2 Future Value, Single Cash Flows of an investment decreases. 2.1.3 Present Value, Single Cash Flows Assuming other variables stay the same, if the interest rate increases, the present value O 2.1.4 Annulties of an investment decreases. 2.1.5 Valuing Multiple Cash Flows O The interest rate and the present value of an investment are directly related. 2.1.6 Additional Detail on Present and Future Values 2.1.7 Yield SAVE & CONTINUE 2.2 Bond Valuation O Report an issue with this question 2.2.1 The Basics of Interest Rates 2.2.2 Understanding Bonds 2.2.3 Key Characteristics of Bonds 2.2.4 Advantages and Disadvantages of Bonds 2.2.5 Types of Bonds 2.2.6 Valuing BondsUNIT 2 - MILESTONE 2 114 SUBMIT MILESTONE Question 8 O Mark this question Here are all the tutorials from Unit 2. Use them as needed throughout the Unit 2 Milestone. An investment fund that uses more complex investment strategies to generate returns for their wealthy or Institutional investors Is a(n) UNIT 2 TUTORIALS O hedge fund 2.1 Time Value of Cash Flows O 2.1.1 Introduction to the Time Value of Money O mutual fund 2.1.2 Future Value, Single Cash Flows O exchange-traded fund 2.1.3 Present Value, Single Cash Flows O index fund 2.1.4 Annuities 2.1.5 Valuing Multiple Cash Flows 2.1.6 Additional Detail on Present and Future Values SAVE & CONTINUE 2.1.7 Yield Report an Issue with this question 2.2 Bond Valuation O 2.2.1 The Basics of Interest Rates 2.2.2 Understanding Bonds 2.2.3 Key Characteristics of Bonds 2.2.4 Advantages and Disadvantages of Bonds 2.2.5 Types of Bonds javascript:void(0); 2.2.6 Valuing BondsUNIT 2 - MILESTONE 2 114 SUBMIT MILESTONE Question 9 O Mark this question Here are all the tutorials from Unit 2. Use them as needed throughout the Unit 2 Milestone. Which of the following accurately describes a flat yield curve? UNIT 2 TUTORIALS O A curve that slopes upward as maturities lengthen and that indicates fear that the economy is about to enter a recession. 2.1 Time Value of Cash Flows O 2.1.1 Introduction to the Time Value of Money A curve that slopes downward as maturities lengthen and that indicates confidence that economic activity will grow in the future. 2.1.2 Future Value, Single Cash Flows 2.1.3 Present Value, Single Cash Flows A curve with a minimal spread between short-term and long-term maturities and that indicates concern or doubt about the strength of the economy. 2.1.4 Annulties 2.1.5 Valuing Multiple Cash Flows O A curve that rises sharply and then levels off as maturities lengthen and that indicates a transition between a period of economic stagnation to one of growth. 2.1.6 Additional Detail on Present and Future Values 2.1.7 Yield SAVE & CONTINUE 2.2 Bond Valuation O Report an Issue with this question 2.2.1 The Basics of Interest Rates 2.2.2 Understanding Bonds 2.2.3 Key Characteristics of Bonds 2.2.4 Advantages and Disadvantages of Bonds 2.2.5 Types of Bonds javascript:void(0); 2.2.6 Valuing BondsUNIT 2 - MILESTONE 2 114 SUBMIT MILESTONE Question 10 O Mark this question Here are all the tutorials from Unit 2. Use them as needed throughout the Unit 2 Milestone. Which of the following is the most accurate measure of how much interest you accrue on an Investment? UNIT 2 TUTORIALS O EAR 2.1 Time Value of Cash Flows O 2.1.1 Introduction to the Time Value of Money O APR 2.1.2 Future Value, Single Cash Flows O NPV 2.1.3 Present Value, Single Cash Flows O Nominal APR 2.1.4 Annuities 2.1.5 Valuing Multiple Cash Flows 2.1.6 Additional Detail on Present and Future Values SAVE & CONTINUE 2.1.7 Yield Report an Issue with this question 2.2 Bond Valuation O 2.2.1 The Basics of Interest Rates 2.2.2 Understanding Bonds 2.2.3 Key Characteristics of Bonds 2.2.4 Advantages and Disadvantages of Bonds 2.2.5 Types of Bonds javascript:void(0); 2.2.6 Valuing BondsUNIT 2 - MILESTONE 2 113 SUBMIT MILESTONE Question 12 O Mark this question Here are all the tutorials from Unit 2. Use them as needed throughout the Unit 2 Milestone. What effect would a CCC credit rating likely have on a bond? UNIT 2 TUTORIALS O The bond's interest rate would be unaffected because credit rating agencies are not considered impartial. 2.1 Time Value of Cash Flows O 2.1.1 Introduction to the Time Value of Money O The bond would have a higher interest rate to compensate for increased risk. 2.1.2 Future Value, Single Cash Flows The bond would have a typical interest rate because the bond is considered O 2.1.3 Present Value, Single Cash Flows investment grade. 2.1.4 Annulties O The bond would have a lower interest rate because the credit rating is poor. 2.1.5 Valuing Multiple Cash Flows 2.1.6 Additional Detail on Present and Future Values SAVE & CONTINUE 2.1.7 Yield Report an issue with this question 2.2 Bond Valuation O 2.2.1 The Basics of Interest Rates 2.2.2 Understanding Bonds 2.2.3 Key Characteristics of Bonds 2.2.4 Advantages and Disadvantages of Bonds 2.2.5 Types of Bonds javascript:void(0); 2.2.6 Valuing BondsUNIT 2 - MILESTONE 2 113 SUBMIT MILESTONE Question 13 O Mark this question Here are all the tutorials from Unit 2. Use them as needed throughout the Unit 2 Milestone. Determine the value of a stock with the following variables using the constant growth model: . Current annual dividend: $2.75 per share UNIT 2 TUTORIALS . Required return rate: 8.5% 2.1 Time Value of Cash Flows O . Constant growth rate: 6% 2.1.1 Introduction to the Time Value of Money 2.1.2 Future Value, Single Cash Flows O $119.35 2.1.3 Present Value, Single Cash Flows O $110.00 2.1.4 Annulties 2.1.5 Valuing Multiple Cash Flows $116.60 2.1.6 Additional Detail on Present and Future Values O $114.70 2.1.7 Yield 2.2 Bond Valuation O SAVE & CONTINUE 2.2.1 The Basics of Interest Rates Report an issue with this question 2.2.2 Understanding Bonds 2.2.3 Key Characteristics of Bonds 2.2.4 Advantages and Disadvantages of Bonds 2.2.5 Types of Bonds javascript:void(0); 2.2.6 Valuing BondsUNIT 2 - MILESTONE 2 113 SUBMIT MILESTONE Question 14 O Mark this question Here are all the tutorials from Unit 2. Use them as needed throughout the Unit 2 Milestone. Which of the following is an advantage of bonds for a potential Investor? O Since there is only one type of bond, they are easy to understand. UNIT 2 TUTORIALS 2.1 Time Value of Cash Flows O O The interest rate on a bond can increase if a credit rating agency upgrades the bond. 2.1.1 Introduction to the Time Value of Money O Prices remain the same regardless of whether market interest rates change. 2.1.2 Future Value, Single Cash Flows 2.1.3 Present Value, Single Cash Flows O They offer predictability when it comes to long-term financial planning. 2.1.4 Annuities 2.1.5 Valuing Multiple Cash Flows SAVE & CONTINUE 2.1.6 Additional Detail on Present and Future Values 2.1.7 Yield Report an Issue with this question 2.2 Bond Valuation O 2.2.1 The Basics of Interest Rates 2.2.2 Understanding Bonds 2.2.3 Key Characteristics of Bonds 2.2.4 Advantages and Disadvantages of Bonds 2.2.5 Types of Bonds javascript:void(0); 2.2.6 Valuing BondsUNIT 2 - MILESTONE 2 113 SUBMIT MILESTONE Question 15 O Mark this question Here are all the tutorials from Unit 2. Use them as needed throughout the Unit 2 Milestone. Max is willing to take on a little risk when she buys a bond, but she wants to be compensated for her risk with an elevated interest rate. What kind of bond should she buy? UNIT 2 TUTORIALS 2.1 Time Value of Cash Flows O O Subordinated 2.1.1 Introduction to the Time Value of Money 2.1.2 Future Value, Single Cash Flows O Inflation-linked 2.1.3 Present Value, Single Cash Flows O Convertible 2.1.4 Annulties 2.1.5 Valuing Multiple Cash Flows O Zero-coupon 2.1.6 Additional Detail on Present and Future Values 2.1.7 Yield SAVE & CONTINUE 2.2 Bond Valuation O Report an issue with this question 2.2.1 The Basics of Interest Rates 2.2.2 Understanding Bonds 2.2.3 Key Characteristics of Bonds 2.2.4 Advantages and Disadvantages of Bonds 2.2.5 Types of Bonds 2.2.6 Valuing BondsUNIT 2 - MILESTONE 2 113 SUBMIT MILESTONE Question 16 O Mark this question Here are all the tutorials from Unit 2. Use them as needed throughout the Unit 2 Milestone. Select the pairing that is correctly matched. Common stock: the value of the stock is dependant upon the overall value of the UNIT 2 TUTORIALS O company 2.1 Time Value of Cash Flows O 2.1.1 Introduction to the Time Value of Money O Preferred stock: cannot be converted for common stock shares 2.1.2 Future Value, Single Cash Flows O Common stock: the issuer must honor any missed dividend payments 2.1.3 Present Value, Single Cash Flows O Preferred stock: stockholder receives interest from the issuer 2.1.4 Annuities 2.1.5 Valuing Multiple Cash Flows 2.1.6 Additional Detail on Present and Future Values SAVE & CONTINUE 2.1.7 Yield Report an issue with this question 2.2 Bond Valuation O 2.2.1 The Basics of Interest Rates 2.2.2 Understanding Bonds 2.2.3 Key Characteristics of Bonds 2.2.4 Advantages and Disadvantages of Bonds 2.2.5 Types of Bonds javascript:void(0); 2.2.6 Valuing BondsUNIT 2 - MILESTONE 2 113 SUBMIT MILESTONE Question 17 Mark this question Here are all the tutorials from Unit 2. Use them as needed throughout the Unit 2 Milestone. Consider what you have learned about valuing bonds. . A: Coupon rate = 3.5%, YTM = 4% . B: Coupon rate = 3.2%, YTM = 3.2% UNIT 2 TUTORIALS . C: Coupon rate = 2.8%, YTM = 3.5% 2.1 Time Value of Cash Flows O . D: Coupon rate = 4%, YTM = 3.7% 2.1.1 Introduction to the Time Value of Money Which of the bonds is selling at a premium? 2.1.2 Future Value, Single Cash Flows 2.1.3 Present Value, Single Cash Flows O A 2.1.4 Annulties O B 2.1.5 Valuing Multiple Cash Flows 2.1.6 Additional Detail on Present and Future Values O C 2.1.7 Yield O D 2.2 Bond Valuation O 2.2.1 The Basics of Interest Rates SAVE & CONTINUE 2.2.2 Understanding Bonds 2.2.3 Key Characteristics of Bonds Report an issue with this question 2.2.4 Advantages and Disadvantages of Bonds 2.2.5 Types of Bonds javascript:void(0); 2.2.6 Valuing BondsUNIT 2 - MILESTONE 2 113 SUBMIT MILESTONE Question 18 O Mark this question Here are all the tutorials from Unit 2. Use them as needed throughout the Unit 2 Milestone. You loan $30,000 of your life savings to a friend for five years at 2% simple interest annually. What is the value of your $30,000 in five years? UNIT 2 TUTORIALS 2.1 Time Value of Cash Flows O O $27,000 2.1.1 Introduction to the Time Value of Money 2.1.2 Future Value, Single Cash Flows O $33,000 2.1.3 Present Value, Single Cash Flows O $26,878 2.1.4 Annulties 2.1.5 Valuing Multiple Cash Flows O $33,122 2.1.6 Additional Detail on Present and Future Values 2.1.7 Yield SAVE & CONTINUE 2.2 Bond Valuation O Report an issue with this question 2.2.1 The Basics of Interest Rates 2.2.2 Understanding Bonds 2.2.3 Key Characteristics of Bonds 2.2.4 Advantages and Disadvantages of Bonds 2.2.5 Types of Bonds javascript:void(0); 2.2.6 Valuing BondsUNIT 2 - MILESTONE 2 113 SUBMIT MILESTONE Question 20 O Mark this question Here are all the tutorials from Unit 2. Use them as needed throughout the Unit 2 Milestone. You would like to have $8,000 in an account after four years' time. If the account earns 4% compounded Interest yearly, how much would you have to deposit today? UNIT 2 TUTORIALS 2.1 Time Value of Cash Flows O O $7,692 2.1.1 Introduction to the Time Value of Money 2.1.2 Future Value, Single Cash Flows O $6,838 2.1.3 Present Value, Single Cash Flows O $6,897 2.1.4 Annulties 2.1.5 Valuing Multiple Cash Flows O $7,249 2.1.6 Additional Detail on Present and Future Values 2.1.7 Yield SAVE & CONTINUE 2.2 Bond Valuation O Report an issue with this question 2.2.1 The Basics of Interest Rates 2.2.2 Understanding Bonds 2.2.3 Key Characteristics of Bonds 2.2.4 Advantages and Disadvantages of Bonds 2.2.5 Types of Bonds javascript:void(0); 2.2.6 Valuing Bonds