CORPORATE FINANCE EXAM 2 ANSWERS |
COMPLETE STUDY GUIDE AND PRACTICE
QUESTIONS
| GRADED A+ | GUARANTEED SUCCESS
Updated 2026 Questions and Answers
100% Verified Exam Prep
, FV of an annuity due since all cash flows are due at the beginning of each year, each cash flow is
compounded for one extra period
PV of an annuity due since all cash flows are due at the beginning of each year, each cash flow is discounted
for one less period
compounding and discounting compounding for one more period is the same as discounting for one less period
perpetuity -a financial instrument that promises to pay an equal cash flow per period forever
-an infinite series of payments/infinite annuity
frequency of compounding affects how much _______ is earned interest
nominal interest rate -the annual interest rate that is quoted
-APR
-not necessarily the interest that is earned
effective annual rate -EAR
-the actual interest rate that is earned
-most relevant rate in financial analysis
when interest is compounded annually, EAR and APR... are the same
when interest is compounded semiannually, EAR and APR... -half of the nominal rate is earned at the end of six month on the original principal
-half the nominal rate is earned at the end of the year on the original principal as well as
the previously earned interest
pure discount loan -borrower pays the principal and interest on the principal in one lump sum in the future
-no periodic interest payments
-one full amount paid in a single cash flow
interest-only loan -borrower pays interest each period and pays the entire principal back at the end/some
point in the future
-every period you pay an interest payment but nothing from the principal
-at the end, when you want to pay off your loan, you pay both the interest for the last
period and the principal payment
-most corporate bonds
COMPLETE STUDY GUIDE AND PRACTICE
QUESTIONS
| GRADED A+ | GUARANTEED SUCCESS
Updated 2026 Questions and Answers
100% Verified Exam Prep
, FV of an annuity due since all cash flows are due at the beginning of each year, each cash flow is
compounded for one extra period
PV of an annuity due since all cash flows are due at the beginning of each year, each cash flow is discounted
for one less period
compounding and discounting compounding for one more period is the same as discounting for one less period
perpetuity -a financial instrument that promises to pay an equal cash flow per period forever
-an infinite series of payments/infinite annuity
frequency of compounding affects how much _______ is earned interest
nominal interest rate -the annual interest rate that is quoted
-APR
-not necessarily the interest that is earned
effective annual rate -EAR
-the actual interest rate that is earned
-most relevant rate in financial analysis
when interest is compounded annually, EAR and APR... are the same
when interest is compounded semiannually, EAR and APR... -half of the nominal rate is earned at the end of six month on the original principal
-half the nominal rate is earned at the end of the year on the original principal as well as
the previously earned interest
pure discount loan -borrower pays the principal and interest on the principal in one lump sum in the future
-no periodic interest payments
-one full amount paid in a single cash flow
interest-only loan -borrower pays interest each period and pays the entire principal back at the end/some
point in the future
-every period you pay an interest payment but nothing from the principal
-at the end, when you want to pay off your loan, you pay both the interest for the last
period and the principal payment
-most corporate bonds
