1. The present value of a perpetuity is the promised constant cash payment divid

Question

1. The present value of a perpetuity is the promised constant cash payment divided by the interest rate (i). a. True b. False 2. The APR (annual percentage rate) is defined as the simple interest charged per period multiplied by the number of periods per year. a. True b. False 3. The variance is equal to the square root of the standard deviation. a. True b. False 4. If you are building a portfolio, then you desire assets that have a correlation coefficient of one. a. True b. False 5. Zero coupon bonds sell well above their par value because they offer no coupons. a. True b. False 6. The real rate of interest varies with the business cycle, with the highest rates seen at the end of a period of business expansion and the lowest at the bottom of a recession. a. True b. False 7. All other things being equal, a given change in the interest rates will have a greater impact on the price of a low-coupon bond than a higher-coupon bond with the same maturity. a. True b. False 8. In the general dividend-valuation model, the price of a share of stock is the present value of all expected future dividends. a. True b. False

Explanation / Answer

1.T 2.T 3.F 4.T 5.T 6.F 7.F 8.T

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