# Corporate Finance Homework 5

10 Questions  I  By Cbprice
These are the homework questions for Chapter 5 in Corporate Finance.

Changes are done, please start the quiz.

 1 Which one of the following features distinguishes an ordinary annuity from an annuity due?
 A. Annuity interest rate
 B. Frequency of the payments
 C. Amount of each payment
 D. Number of equal payments
 E. Timing of the annuity payments
 2 Lee pays one percent per month interest on his credit card account. When his monthly rate is multiplied by 12, the resulting answer is referred to as the:
 A. Effective annual rate.
 B. Perpetual rate.
 C. Simple rate.
 D. Annual percentage rate.
 E. Compounded rate.
 3 Which one of the following statements concerning annuities is correct?
 A. The present value of an annuity is equal to the cash flow amount divided by the discount rate.
 B. An annuity due has payments that occur at the beginning of each time period.
 C. If unspecified, you should assume an annuity is an annuity due.
 D. The future value of an annuity decreases as the interest rate increases.
 E. An annuity is an unending stream of equal payments occurring at equal intervals of time.
 4 Which one of the following statements is correct?
 A. The APR is equal to the EAR for a loan that charges interest monthly.
 B. The APR is the best measure of the actual rate you are paying on a loan.
 C. The APR on a monthly loan is equal to (1 + monthly interest rate)12 - 1.
 D. The EAR is always greater than the APR.
 E. The EAR, rather than the APR, should be used to compare both investment and loan options.
 5 Which one of the following qualifies as an annuity?
 A. Auto loan payment
 B. Medical bills
 C. Clothing purchases
 D. Car repairs
 E. Weekly grocery bill
 6 When comparing savings accounts, you should select the account that has the:
 A. Highest effective annual rate.
 B. Highest stated rate.
 C. Lowest effective annual rate.
 D. Highest annual percent rate.
 E. Lowest annual percentage rate.
 7 The Jones Brothers recently established a trust fund that will provide annual scholarships of \$12,000 indefinitely. These annual scholarships can best be described by which one of the following terms?
 A. Annuity due
 B. Continuation
 C. Ordinary annuity
 D. Amortized payment
 E. Perpetuity
 8 Which one of the following has the highest effective annual rate?
 A. All the other answers have the same effective annual rate.
 B. 6 percent compounded annually
 C. 6 percent compounded semi-anually
 D. 6 percent compounded quarterly
 E. 6 percent compounded monthly
 9 Which one of the following is an ordinary annuity, but not a perpetuity?
 A. \$40 paid quarterly for five years, starting today
 B. \$25 paid weekly for one year, starting one week from today
 C. \$50 paid every year for ten years, starting today
 D. \$15 paid at the end of each monthly period for an infinite period of time
 E. \$75 paid at the beginning of each month period for 50 years
 10 Travis is buying a car and will finance it with a loan which requires monthly payments of \$265 for the next 4 years. His car payments can be described by which one of the following terms?
 A. Annuity
 B. Lump sum
 C. Factor
 D. Consol
 E. Perpetuity
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