Assignment I
At the end of each year for the next 10 years, you will receive cash flows of $50. If the appropriate discount rate is 5.5%, how much would you pay for the annuity?
A) $259.82 B) $299.02 C) $338.99 D) $376.88 E) 379.16
What is the proper measure of cash flow to creditors in a given year?
A. Interest paid minus net new borrowing.
B. Interest paid.
C. Operating cash flow minus net new borrowing.
D. Interest paid plus changes in long term debt.
E. Interest paid plus net new borrowing minus additions to net fixed assets.
Which of the following would result in a decrease in the net working capital of Corner Lot Inc.?
A. Corner Lot pays one of its accounts payable with cash.
B. Corner Lot uses cash to purchase fixed assets.
C. Corner Lot buys inventory, using cash.
D. Corner Lot pays off a short-term note with cash, closing the notes payable account.
E. Corner Lot obtains cash by taking out a bank loan due 5 years from now.
Suppose you open today’s China Securities Journal and see that 30-year Bonds are yielding 8.5 percent. This is an example of ____________ .
A. a real return D. a default risk premium
B. a nominal return E. a tax premium
C. an inflation premium