21. 20. 19 pllowing are CORRECT? & EAR is always greater than the nominal rate when the interest rate is annually compounding b. EAR always the same as the nominal rate when the interest rate is annually compounding EAR is always less than the nominal rate when the interest rate is annually compounding d. Not enough information. You are analyzing the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following factors would lower the calculated present value of this proposed investment? a. The total amount of cash flows remains the same, but more of the cash flows are received in the earlier years and less is received in the later years. b. The discount rate decreases. c. The riskiness of the investment's cash flows increases. d. All of the above. If we are given a periodic interest rate, say a monthly rate, we can find the nominal annual rate by dividing the periodic rate by the number of periods per year. a. True b. False Financial leverage a. increases the potential return to the shareholders. b. increases as the net working capital increases. c. Is the ratio of a firm's revenues to its fixed expenses. d. is inversely related to the level of debt.
21. 20. 19 pllowing are CORRECT? & EAR is always greater than the nominal rate when the interest rate is annually compounding b. EAR always the same as the nominal rate when the interest rate is annually compounding EAR is always less than the nominal rate when the interest rate is annually compounding d. Not enough information. You are analyzing the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following factors would lower the calculated present value of this proposed investment? a. The total amount of cash flows remains the same, but more of the cash flows are received in the earlier years and less is received in the later years. b. The discount rate decreases. c. The riskiness of the investment's cash flows increases. d. All of the above. If we are given a periodic interest rate, say a monthly rate, we can find the nominal annual rate by dividing the periodic rate by the number of periods per year. a. True b. False Financial leverage a. increases the potential return to the shareholders. b. increases as the net working capital increases. c. Is the ratio of a firm's revenues to its fixed expenses. d. is inversely related to the level of debt.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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18-21
Transcribed Image Text:21.
20.
19
181
Which of the pllowing are CORRECT?
aEAR is always greater than the nominal rate when the interest rate is annually
compounding
EAR is always the same as the nominal rate when the interest rate is annually
compounding
EAR is always less than the nominal rate when the interest rate is annually
compounding
d. Not enough information.
You are analyzing the value of a potential investment by calculating the sum of the
present values of its expected cash flows. Which of the following factors would
lower the calculated present value of this proposed investment?
a. The total amount of cash flows remains the same, but more of the cash flows
are received in the earlier years and less is received in the later years.
b. The discount rate decreases.
c. The riskiness of the investment's cash flows increases.
d. All of the above.
If we are given a periodic interest rate, say a monthly rate, we can find the nominal
annual rate by dividing the periodic rate by the number of periods per year.
a. True
b. False
Financial leverage
a. increases the potential return to the shareholders.
b. increases as the net working capital increases.
c. Is the ratio of a firm's revenues to its fixed expenses.
d. is inversely related to the level of debt.
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