8 Questions

Words for Chapter 5

Questions and Answers

- 1.The interest rate per priod mulitplier by the number of periods in a year is called the
- A.
Call rate

- B.
Coupon

- C.
Annual percentage rate

- D.
Discount rate

- 2.The difference between an ordinary annuity and an annuity due is the
- A.
Only on the initial investment

- B.
Timing of the annuity payments

- C.
Ordinary cash flow

- 3.Which one of the following is an annuity, but not a perpetuity
- A.
Unequal payments each month for 18 months

- B.
Amount of tax due on the next dollar of taxable income

- C.
Equal payments every six months for 48 months

- 4.Payments of $100 a month for 24 month are defined as an
- A.
Ordinary cash flow

- B.
Annuity

- C.
Annuity due

- D.
Issue date

- 5.A series of equal cash flows that occur at the beginning of each time period for a limited number of time periods is called an
- A.
Annuity due

- B.
Marginal

- C.
Is a noncash expense

- D.
Present value

- 6.Which one of the following statement concerning annuities is correct
- A.
An annuity due has payment that occur at the beginning of each time period

- B.
Equal payments every six months for 48 months

- C.
Annual percentage rate

- 7.Which one of the following is a perpetuity
- A.
$1,000 annual payments from a trust fund forever

- B.
$50.00 a months for a year

- C.
$100 annual payments until I die.

- 8.A series of unending cash flows of equal amount that occur at equal intervals of time is called an
- A.
Annuity due

- B.
Perpetuity

- C.
Annuity