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# Which one of the following statements is true about an amortized loan

Subject: Business / Finance
Question
Which one of the following statements is true about an amortized loan?
A.With an amortized loan, a smaller proportion of each month’s payment goes toward interest in the early periods.
B.With an amortized loan, a bigger proportion of each month’s payment goes toward interest in the later periods.
C.With an amortized loan, a bigger proportion of each month’s payment goes toward interest in the early periods.
D.With an amortized loan, the proportion of the loan that goes toward interest does not change at any point.
2 points

Question 2
If your investment pays the same amount at the end of each year forever, the cash flow stream is called:
A.an ordinary annuity.
B.a perpetuity.
C.an annuity due.
D.none of the above.
2 points

Question 3
Use the following table to calculate the expected return for the asset.
Return Probability 0.10 0.30 0.20 0.50 0.25 0.25
A.15.0%
B.17.5%
C.18.75%
D.19.25%
3 points

Question 4
George purchased a stock for \$45 one year ago. The stock is now worth \$65. During the year, the stock paid a dividend of \$2.50. What is the total return to George from owning the stock? (Round your answer to the nearest whole percent.)
A.5%
B.44%
C.35%
D.50%
4 points

Question 5
Barbara purchased a piece of real estate last year for \$85,000. The real estate is now worth \$102,000. If Barbara needs to have a total return of 25 percent during the year, then what is the dollar amount of income that she needed to have to reach her objective?
A.\$3,750
B.\$4,250
C.\$4,750
D.\$5,250
4 points

Question 6
The risk-free rate of return is currently 3 percent, whereas the market risk premium is 6 percent. If the beta of Lenz, Inc., stock is 1.8, then what is the expected return on Lenz?
A.8.40%
B.10.80%
C.13.80%
D.19.20%
4 points

Question 7
Which can be true for diversified portfolios with more than one asset.
A.The correlation coefficient between the returns on two assets will always have a value between 0 and +1.
B.If the correlation is negative: returns tend to have opposite signs.
C.If the correlation is positive: the return on one asset is positive and the return on the other asset tends to be negative.
D.For a correlation of +1, the returns on the assets are not correlated.
2 points

Question 8
Bonds sell at a discount off the par value when market rates for similar bonds are:
A.Less than the bond’s coupon rate.
B.Greater than the bond’s coupon rate.
C.Equal to the bond’s coupon rate.
D.Market rates are irrelevant in determining a bond’s price.
2 points

Question 9
The yield to maturity of a bond is the discount rate that makes the present value of the coupon and principal payments
A.exceed the price of the bond.
B.equal to zero.
C.equal to the price of the bond.
D.less than the price of the bond.
2 points

Question 10
Inverted yield curves are observed when
A.the economy is growing.
B.the economy is stagnant.
C.the economy is in recession.
D.None of the above.
2 points

Question 11
Owners of preferred stock
A.have limited voting rights.
B.are guaranteed dividend payments.
C.are given priority treatment over common stock with respect to dividends payments and the claims against the firm’s assets in the event of bankruptcy or liquidation.
D.All of the above statements are true.
2 points

Question 12
The constant-growth dividend model will provide invalid solutions when
A.the growth rate of the stock exceeds the required rate of return for the stock.
B.the growth rate of the stock is less than the required rate of return for the stock.
C.the growth rate of the stock equals the required rate of return for the stock.
D.None of the above.
2 points

Question 13
The internal rate of return is:
A.the discount rate that makes the NPV (Net Present Value) greater than zero.
B.the discount rate that makes the NPV equal to zero.
C.the discount rate that makes the NPV less than zero.
D.both a and c.
2 points

Question 14
To ensure that the financial statements articulate, it is important that the change in the cash balance on the balance sheet each year agrees with
A.the cash collections from sales in the projected income statement.
B.the cash provided by or used by operations on the projected statement of cash flows.
C.the net change in cash on the projected statement of cash flows.
D.the net change in working capital from period to period.
2 points

Question 15
Sparky’s

Sparky’s sells auto parts. Provided below is selected financial information from the company’s 2016 annual report:

Sparky’s Selected Financial Statement data
Fiscal year end2016
2015
(amounts in thousands of dollars) Net sales\$125,410
\$106,380
Cost of Goods Sold104,090
89,359
Gross Profit\$21,320
\$17,021
Inventory\$31,353
\$30,850

Using Sparky’s financial information what is the company’s inventory turnover ratio for 2016?
A.0.69
B.1.00
C.3.35
D.4.03
4 points

Question 16
Free cash flow is calculated as net cash provided by operating activities less
A.dividends.
B.capital expenditures and depreciation.
C.capital expenditures.
D.capital expenditures and dividends.
2 points

Question 17
The present value of a perpetuity is the promised constant cash payment divided by the interest rate (I).
True
False
1 points

Question 18
The APR (annual percentage rate) is defined as the simple interest charged per period multiplied by the number of periods per year.
True
False
1 points

Question 19
The variance is equal to the square root of the standard deviation.
True
False
1 points

Question 20
If you are building a diversified portfolio, then you desire assets that do not have a correlation coefficient of one.
True
False
1 points

Question 21
Zero coupon bonds sell well above their par value because they offer no coupons.
True
False
1 points

Question 22
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.
True
False
1 points

Question 23
All other things being equal, a given change in the interest rates will have a greater impact on the price of a high-coupon bond than a lower-coupon bond with the same maturity.
True
False
1 points

Question 24
In the general dividend-valuation model, the price of a share of stock is the present value of all expected future dividends.
True
False
1 points

Question 25
Over sufficiently long periods, net income is always higher than free cash flows to common equity.
True
False