1.) The main variables of the TVM equation are

A) present value, future value, time, interest rate, and payment.

B) present value, future value, perpetuity, interest rate, and payment.

C) present value, future value, time, annuity, and interest rate.

D) present value, future value, perpetuity, interest rate, and principal

2.) A/An ________ is a series of equal end-of-the-period cash flows.

A) ordinary annuity

B) annuity due

C) perpetuity due

D) None of the above

3.) 11) Of the following, which is NOT an activity engaged in by a financial intermediary?

A) Matching borrowers and lenders

B) Bearing risk

C) Managing retirement portfolios for large classes of employees

D) All of the above are activities of financial intermediaries.

4.) The sale of "used" securities, where the financial asset is being traded from one individual to another and the proceeds do not go to the original issuer of the security, is said to take place in the ________ market.

A) primary

B) money

C) secondary

D) capital

5.) Which of the statements below is TRUE?

A) The ownership accounts or owners' equity section of the balance sheet reflects the owners' stake in the firm.

B) The ownership accounts or owners' equity section of the balance sheet is made up of common stock but not retained earnings.

C) The retained earnings amount on the balance sheet really reflect retained earnings and other stockholder equity, but not treasury stock.

D) The Statement of Retained Earnings is used to show the distribution of the interest paid for the past period.

6.) Which of the following formulas is correct for finding the present value of an investment?

A) FV =

B) PV = FV (1 + r)n

C) PV = FVn (1 + r)

D) PV = FV

7.) A furniture store has a sofa on sale for $399.00, with the payment due one year from today. The store is willing to discount the price at an annual rate of 5% if you pay today. What is the amount if you pay today?

A) $380

B) $399

C) $419

D) $394

8.) The value of a financial asset is the ________.

A) present value of all of the future cash flows that will be received

B) sum of all previous cash flows received

C) future value of just the capital gains but not the dividends

D) present value of just the capital gains but not the dividends

9.) The Cougar Corporation has issued 20-year semiannual coupon bonds with a face value of $1,000. If the annual coupon rate is 10% and the current yield to maturity is 12%, what is the firm's current price per bond?

A) $850.61

B) $849.54

C) $1,170.27

D) $1,171.59

10.) Preferred stock ________.

A) reflects residual ownership of a company

B) represents a preferential claim on dividends

C) will be "paid" before the bondholders

D) always has a legal and specific claim to a fixed amount (listed as a liability)