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BUS 401 Week 2 Quiz

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1. In an amortized loan: (Points : 1)

the payments are the same every period, but the proportion that is interest increases.
the payments are the same every period, and the proportion that is interest also is unchanged.
the payments vary every period, but the proportion that is interest doesn’t change.
the payments are the same every period, but the proportion that is interest decreases.

 

Question 2. 2. The name “annuity” suggests annual payments, but in fact we apply the term to: (Points : 1)

any set of payments of the same dollar amount irrespective of timing.
any set of monthly payments.
any set of regularly spaced payments of the same dollar amount.
any set of multiple payments.

 

Question 3. 3. Shareholders gains come in the form of: (Points : 1)

only dividends.
only capital gains.
dividends and capital gains.
interest payments.

 

Question 4. 4. The present value of $1,000 to be received in 1 year with annual compounding at a 10% per year rate, would be: (Points : 1)

$900.00.
$909.09.
$990.90.
$1,100.

 

Question 5. 5. Common stock that pays cash dividends can be viewed as: (Points : 1)

an annuity—regularly spaced payments of the same dollar amount for a fixed number of periods.
a perpetuity—regularly spaced payments of the same dollar amount that continue indefinitely.
similar to a perpetuity but with irregular spacing of the dividends.
similar to a perpetuity but with dividends that change amount.

 

Question 6. 6. Zeta Corporation just paid a $2.00 dividend. Analysts believe that Zeta Corporation’s dividend will grow by 20% next year, and then settle into a constant growth regime at 5% per year into the future. If investors assign a required rate of return of 12% to Zeta’s stock, what should the stock sell for today? (Points : 1)

$30.00
$32.14
$34.29
$36.00

 

Question 7. 7. If we make the assumption that a company’s dividends grow at some constant rate, then we can value the stock as: (Points : 1)

a growing perpetuity.
a growing annuity.
a perpetuity.
an annuity.

 

Question 8. 8. We would expect that, all else being equal, investors would pay more for a stock with a higher dividend growth rate. Assume a stock has just paid a $2.00-per-share dividend. Analysts believe that future dividends will grow at a 6% rate. The required rate of return is 11%. What would the stock price be? (Points : 1)

$29.71
$31.71
$40.00
$42.40

 

 

 

Question 9. 9. Suppose a zero-coupon bond is selling for $614.00 today. It promises to pay $1,000 in exactly 10 years with annual compounding. Its annual rate of return would be about ____. (Points : 1)

4%
5%
6%
7%

 

Question 10. 10. The payment structure of a corporate bond is best thought of as: (Points : 1)

an annuity of interest payments.
an annuity of principal and interest payments.
an annuity of principal payments.
an annuity of interest payments and a single principal payment at maturity.