BUS401 Week 2 quiz
GMX Resources, an independent oil and gas exploration and
production company, has a 9.25% preferred stock outstanding, which pays
an annual dividend of $2.3125. If investors require a return of 15% on
small companies in this sector, what will this preferred stock sell for?
(Points : 1) $14.11
$14.72
$15.41
$28.58
| Question 2. 2. The present value of $1,000 to be received in 1 year with annual compounding at a 10% per year rate, would be: (Points : 1) |
$900.00.
$909.09.
$990.90.
$1,100. |
| Question 3. 3. $10,000 will be received exactly 10 years from today. The following statement is true: (Points : 1) |
If the interest rate increases, so does the present value of the $10,000.
If the interest rate increases, the present value of the $10,000 decreases.
It is worth $10,000 today.
It will have a present value greater than $10,000. |
| Question 4. 4. Which of the following is true of the structure of a zero-coupon bond? (Points : 1) |
an annuity of interest payments and a single principal payment at maturity
no interim interest payments but a variable payment at maturity, depending on interest rates
an annuity of payments comprised of both interest and principal
no interim interest payments and a single payment at maturity |
| Question 5. 5. Which of the following statements is NOT true about future values? (Points : 1) |
All else equal, the higher the interest rate, the larger the future value.
All else equal, the lower the interest rate, the larger the future value.
All else equal, the longer the investment time, the larger the future value.
All else equal, the larger the starting amount, the larger the future value. |
| Question 6. 6. An ordinary annuity has its first payment ______, but an annuity due has its first payment _________. (Points : 1) |
at the beginning of the period; at the beginning of the period.
at the beginning of the period; at the end of the period.
at the end of the period; at the end of the period.
at the end of the period; at the beginning of the period. |
| Question 7. 7. In an amortized loan: (Points : 1) |
the payments are the same every period, but the proportion that is interest increases.
the payments are the same every period, and the proportion that is interest also is unchanged.
the payments vary every period, but the proportion that is interest doesn’t change.
the payments are the same every period, but the proportion that is interest decreases. |
| Question 8. 8. The cash flows for a perpetuity continue into the future indefinitely. An example of a perpetuity is: (Points : 1) |
preferred stock.
corporate bonds.
a home mortgage.
a consumer loan. |
| Question 9. 9. The Rule of 72 says: (Points : 1) |
an amount doubles in 72 periods.
an amount triples in 1 year at 72%.
an amount doubles when the product of the rate and number of periods is 72.
an amount triples when the sum of the rate and number of periods is 72. |
| Question 10. 10. Simple interest means that: (Points : 1) |
the interest rate is the same every period.
the dollar amount of interest is the same every period.
interest is only paid once a year.
the compounding periods are annual.
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