the rate of return earned on an investment of 50,000 today that guarantees an an
ID: 2630319 • Letter: T
Question
the rate of return earned on an investment of 50,000 today that guarantees an annuity of 10,489 for six years is approximately
A. 7%
B. 10%
C.12%
D.5%
2.Find the present value of the following stream of a firm's cash flows, assuming that the firm's opportunity cost is 9 percent
Year Amount
1-5 10,0000 yr
6-10 16,000 yr
A. 10,972
B. 79,345
C. 141,588
D. 13,252
3.The purpose of the debt convenant that prohibits borrows from entering into certain types of leases is to
A. Protect the lender by controlling the risk and marketability of the borrower's security investments alternatives
B. Limit the amount of fixed-payment obligations
C. ensure a cash shortage does not cause inability to meet current obligations
D. limit the annual cash dividends paid by the firm
4.The return expected from an asset is fully defined by its
A.Discount rate
B.Cash flow & timing
C. Risk and cash flow
D. Beta
Explanation / Answer
the rate of return earned on an investment of 50,000 today that guarantees an annuity of 10,489 for six years is approximately
Rate of return = rate(6,10489,-50000,0)
Rate of return = 7%
Answer
A. 7%
2.Find the present value of the following stream of a firm's cash flows, assuming that the firm's opportunity cost is 9 percent
Year Amount
1-5 10,0000 yr
6-10 16,000 yr
Present Value = 10000/1.09 + 10000/1.09^2+ 10000/1.09^3 + 10000/1.09^4 + 10000/1.09^5 + 16000/1.09^6 + 16000/1.09^7 + 16000/1.09^8 + 16000/1.09^9 + 16000/1.09^10
Present Value = $ 79345
A. 10,972
B. 79,345
C. 141,588
D. 13,252
3.The purpose of the debt convenant that prohibits borrows from entering into certain types of leases is to
A. Protect the lender by controlling the risk and marketability of the borrower's security investments alternatives
4.The return expected from an asset is fully defined by its
A.Discount rate
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