BSNS114 Exam with Questions and
100% Correct Answers
What are the features of a growing perpetuity? - Answer Cash flows are:
Equally spaced in time
Not equal in size, they grow by constant growth rate "g" per
period Infinite
Occur at the end of the payment period
What are the features of an ordinary annuity? - Answer Cash flows are:
Equally spaced in time
Equal in size
Finite in number
,Occur at the end of the payment period
What are the features of an annuity due? - Answer Cash flows are
Equally spaced in time
Equal in size
Finite in number
Occur at the beginning of the payment period - "due"
What type of loan is pure discount? - Answer Borrower receives money today
and repays a single lump sum in the future
What type of loan is interest only? - Answer Interest is paid periodically and principal is
paid at maturity
What type of loan is an amortised loan? - Answer Equal payments are made,
including partial interest and principal
Almost all loans and mortgages are paid this way
What is a bond? - Answer A security issued in connection with borrowing agreement
between company (bond issuer) and investor (bond holder)
What is FV for a bond? - Answer Principal (face value) is the cash flow bond holders
are promised to receive at maturity
What is t for a bond? - Answer Maturity - the date when the issuer pays back the
face value of the bonds
What is r for a bond? - Answer Coupon rate - the proportion of a principal
, Define working capital management decision - Answer Deals with day to day financial
matters and affect current assets, current liabilities
Define investment decision - Answer Determine what long term productive assets
the firm will purchase (tangible/intangible)
What is the difference between tangible and intangible long term assets? - Answer
Tangible assets - physical existence (land, product, factory)
Intangible assets - non physical (patent, contract, etc.)
Define financing decision - Answer Determine the mix of long term debt and equity
that will be used to finance the firm's long term productive assets
What are the features of sole proprietorship? - Answer Business owned by a
single person
No separation of ownership and management
One person responsible for providing capital and managing the business
What are the advantages of sole proprietorship? - Answer Easy to form and end
Least expensive and regulated form of business
No sharing of profit and loss
Taxed once as personal income
What are the disadvantages of sole proprietorship? - Answer Limited access to capital
Costly to transfer ownership
Unlimited liability
100% Correct Answers
What are the features of a growing perpetuity? - Answer Cash flows are:
Equally spaced in time
Not equal in size, they grow by constant growth rate "g" per
period Infinite
Occur at the end of the payment period
What are the features of an ordinary annuity? - Answer Cash flows are:
Equally spaced in time
Equal in size
Finite in number
,Occur at the end of the payment period
What are the features of an annuity due? - Answer Cash flows are
Equally spaced in time
Equal in size
Finite in number
Occur at the beginning of the payment period - "due"
What type of loan is pure discount? - Answer Borrower receives money today
and repays a single lump sum in the future
What type of loan is interest only? - Answer Interest is paid periodically and principal is
paid at maturity
What type of loan is an amortised loan? - Answer Equal payments are made,
including partial interest and principal
Almost all loans and mortgages are paid this way
What is a bond? - Answer A security issued in connection with borrowing agreement
between company (bond issuer) and investor (bond holder)
What is FV for a bond? - Answer Principal (face value) is the cash flow bond holders
are promised to receive at maturity
What is t for a bond? - Answer Maturity - the date when the issuer pays back the
face value of the bonds
What is r for a bond? - Answer Coupon rate - the proportion of a principal
, Define working capital management decision - Answer Deals with day to day financial
matters and affect current assets, current liabilities
Define investment decision - Answer Determine what long term productive assets
the firm will purchase (tangible/intangible)
What is the difference between tangible and intangible long term assets? - Answer
Tangible assets - physical existence (land, product, factory)
Intangible assets - non physical (patent, contract, etc.)
Define financing decision - Answer Determine the mix of long term debt and equity
that will be used to finance the firm's long term productive assets
What are the features of sole proprietorship? - Answer Business owned by a
single person
No separation of ownership and management
One person responsible for providing capital and managing the business
What are the advantages of sole proprietorship? - Answer Easy to form and end
Least expensive and regulated form of business
No sharing of profit and loss
Taxed once as personal income
What are the disadvantages of sole proprietorship? - Answer Limited access to capital
Costly to transfer ownership
Unlimited liability
