C708 - Principles of Finance - Unit 4 Quiz 2023

Which prediction based on a description of the yield curve is not correct? A flat yield curve suggest that interest rates will be cut. A normal yield curve suggests that interest rates will remain the same in the future. A normal yield curve suggests that interest rates will be raised in the future. An inverted yield curve suggests that interest rates will be dramatically cut. - A normal yield curve suggests that interest rates will remain the same in the future. Which answer is not a factor that influences market interest rates? Deferred consumption Alternative investments Inflationary expectations Stock market activity - Stock market activity Which answer is not a cost to the investor that is included in the calculation of an investment's interest rate? Inflation Brokerage commissions and fees Opportunity Cost Risk of a bad investment - Brokerage commissions and fees Of the following car financing options, which one would you prefer while assuming that you prefer paying the least amount of dollars and that you face a 10% annual compound interest rate on all your financial decisions? A lump-sum payment of $20,000 today only. A payment $10,000 today and another of $10,000 in one year from today. A lump-sum payment of $19,000 today only. A lump-sum payment of $20,000 in two years from today. - A lump-sum payment of $20,000 in two years from today. You expect to receive a payment of $1 million in a year. The annual interest rate is 5%. What is the present value of the future payment? $666,667 $995,025 $105,000 $952,381 - $952,381 What is the present value of $100,000 that will be received 5 years from today if you face a 10% compound interest rate every year (rounded up to the nearest dollar)? $72,092 $62,092 $52,092 $82,092 - $62,092 Which of the following describes the relationship between present value and future value? When one increases, the other increases, assuming all variables are constant. The more time that passes, the higher the present value and the lower the future value. The higher the interest rate, the higher the present value and the lower the future value. When present value increases, the future value decreases, assuming all variables are constant. - When one increases, the other increases, assuming all variables are constant. You own a perpetuity that pays $1000 in the first year. It has a 5% annual interest rate and a 2% annual growth rate. What is the present value of the perpetuity? $50,000