Chapter 04
Discounted Cash Flow Valuation
Multiple Choice Questions
1. An annuity stream of cash flow payments is a set of:
A. level cash flows occurring each time period for a fixed length of time.
B. level cash fl
...
Chapter 04
Discounted Cash Flow Valuation
Multiple Choice Questions
1. An annuity stream of cash flow payments is a set of:
A. level cash flows occurring each time period for a fixed length of time.
B. level cash flows occurring each time period forever.
C. increasing cash flows occurring each time period for a fixed length of time.
D. increasing cash flows occurring each time period forever.
E. arbitrary cash flows occurring each time period for no more than 10 years.
2. Annuities where the payments occur at the end of each time period are called _____,
whereas _____ refer to annuity streams with payments occurring at the beginning of each
time period.
A. ordinary annuities; early annuities
B. late annuities; straight annuities
C. straight annuities; late annuities
D. annuities due; ordinary annuities
E. ordinary annuities; annuities due
3. An annuity stream where the payments occur forever is called a(n):
A. annuity due.
B. indemnity.
C. perpetuity.
D. amortized cash flow stream.
E. amortization table.
4. The interest rate expressed in terms of the interest payment made each period is called the
_____ rate.
A. stated annual interest
B. compound annual interest
C. effective annual interest
D. periodic interest
E. daily interest
4-1Chapter 04 - Discounted Cash Flow Valuation
5. The interest rate expressed as if it were compounded once per year is called the _____ rate.
A. stated interest
B. compound interest
C. effective annual
D. periodic interest
E. daily interest
6. The interest rate charged per period multiplied by the number of periods per year is called
the _____ rate.
A. effective annual
B. annual percentage
C. periodic interest
D. compound interest
E. daily interest
7. Paying off long-term debt by making installment payments is called:
A. foreclosing on the debt.
B. amortizing the debt.
C. funding the debt.
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