You passed this Milestone
18 questions were answered correctly.
2 questions were answered incorrectly.
1
You would like to have $30,000 in an account after five years' time.
If the account earns 3% compounded interest yearly, how much would you have to deposit
today?
$29,126
$28,092
$25,878
$26,087
CONCEPT
Present Value, Single Cash Flows
2
Select the pairing that is correctly matched.
Common stock: the issuer must honor any missed dividend payments
Preferred stock: stockholder receives interest from the issuer
Common stock: the value of the stock is dependant upon the overall value of the company
Preferred stock: cannot be converted for common stock shares
CONCEPT
Rules and Rights of Common and Preferred Stock
3
Select one advantage of an annuity for a borrower.
The sum of all the payments will be less than the original loan amount.
, The payment amount may go down if interest rates fall.
It can be easier to make regular payments rather than a single lump sum.
Annuities do not charge interest.
CONCEPT
Annuities
4
Select the statement that is true of common stock.
Companies issue dividends to common stockholders before preferred stockholders.
Common stockholders do not have a right of first refusal when new stock is issued.
Common stock has a stronger claim to a company's assets than preferred stock.
Despite having fewer financial protections, common stock typically outperforms preferred stock.
CONCEPT
Types of Stock
5
Determine the value of a stock with the following variables using the constant growth
model:
• Current annual dividend: $1.30 per share
• Required return rate: 7%
• Constant growth rate: 5%
$65.00
$68.25
$63.75
$69.55
CONCEPT
,Stock Valuation
6
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.
Which of those numbers represents the bond's call feature?
2038
4
30
2018
CONCEPT
Key Characteristics of Bonds
7
Select the true statement about interest rate risk.
It stems from the fact that bond prices and market interest rates are inversely correlated.
Shorter-term bonds are more sensitive to interest rate risk than longer-term bonds.
It is the risk that a bond's coupon payment will fall if market interest rates fall.
Interest rate risk is particularly problematic for investors who do not wish to sell their bonds.
CONCEPT
Bond Risk
8
You make a loan of $400 with a 6% annual compounded interest for a period of seven years.
What is your $400 worth seven years later?
$568
, $601
$199
$232
CONCEPT
Future Value, Single Cash Flows
9
Which of the following is true for calculating the present value of multiple cash flows?
The PV of multiple cash flows is the sum of the FV of each individual cash flow divided by the
interest rate.
All of the cash flows must be discounted to the same point in time.
You can only find the PV of multiple cash flows if they originate at the same time.
It is more complex to find the PV of annuities than the PV of irregular cash flows.
CONCEPT
Valuing Multiple Cash Flows
10
An investment fund that uses more complex investment strategies to generate returns for
their wealthy or institutional investors is a(n) .
index fund
mutual fund
exchange-traded fund
hedge fund
CONCEPT
Stock Markets
11
18 questions were answered correctly.
2 questions were answered incorrectly.
1
You would like to have $30,000 in an account after five years' time.
If the account earns 3% compounded interest yearly, how much would you have to deposit
today?
$29,126
$28,092
$25,878
$26,087
CONCEPT
Present Value, Single Cash Flows
2
Select the pairing that is correctly matched.
Common stock: the issuer must honor any missed dividend payments
Preferred stock: stockholder receives interest from the issuer
Common stock: the value of the stock is dependant upon the overall value of the company
Preferred stock: cannot be converted for common stock shares
CONCEPT
Rules and Rights of Common and Preferred Stock
3
Select one advantage of an annuity for a borrower.
The sum of all the payments will be less than the original loan amount.
, The payment amount may go down if interest rates fall.
It can be easier to make regular payments rather than a single lump sum.
Annuities do not charge interest.
CONCEPT
Annuities
4
Select the statement that is true of common stock.
Companies issue dividends to common stockholders before preferred stockholders.
Common stockholders do not have a right of first refusal when new stock is issued.
Common stock has a stronger claim to a company's assets than preferred stock.
Despite having fewer financial protections, common stock typically outperforms preferred stock.
CONCEPT
Types of Stock
5
Determine the value of a stock with the following variables using the constant growth
model:
• Current annual dividend: $1.30 per share
• Required return rate: 7%
• Constant growth rate: 5%
$65.00
$68.25
$63.75
$69.55
CONCEPT
,Stock Valuation
6
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.
Which of those numbers represents the bond's call feature?
2038
4
30
2018
CONCEPT
Key Characteristics of Bonds
7
Select the true statement about interest rate risk.
It stems from the fact that bond prices and market interest rates are inversely correlated.
Shorter-term bonds are more sensitive to interest rate risk than longer-term bonds.
It is the risk that a bond's coupon payment will fall if market interest rates fall.
Interest rate risk is particularly problematic for investors who do not wish to sell their bonds.
CONCEPT
Bond Risk
8
You make a loan of $400 with a 6% annual compounded interest for a period of seven years.
What is your $400 worth seven years later?
$568
, $601
$199
$232
CONCEPT
Future Value, Single Cash Flows
9
Which of the following is true for calculating the present value of multiple cash flows?
The PV of multiple cash flows is the sum of the FV of each individual cash flow divided by the
interest rate.
All of the cash flows must be discounted to the same point in time.
You can only find the PV of multiple cash flows if they originate at the same time.
It is more complex to find the PV of annuities than the PV of irregular cash flows.
CONCEPT
Valuing Multiple Cash Flows
10
An investment fund that uses more complex investment strategies to generate returns for
their wealthy or institutional investors is a(n) .
index fund
mutual fund
exchange-traded fund
hedge fund
CONCEPT
Stock Markets
11
