1. what is the difference an ordinary annuity and an annuity due?

a) everything else equal, which annuity has the greater future value: an ordinary annuity or an annuity due? why?

b) All else equal, which annuity has the greater present value: an ordinary annuity or an annuity due? why?

c) a bank is offering 12% compound quarterly. if you put $ 100 in an account, how much will you have at the end of one year? what is the EAR? how much will you have at the end of two years?

2) what does it mean to have Economically efficient financial markets? what does it mean to have informationally efficient market?

a) how are financial markets differentiated?

c) what is the principal role of financial intermediaries?

d) what is a dealer market? how do dealer and auction markets differ?

3) what are the two sources of the dollar return associated with an investment?

a) how is the yield on an investment computed?

b) how does the cost of money affect the value of an asset?

d) other than inflationary expectations, liquidity preferences, and normal supply/demand fluctuations, name four additional factors that influence interest rates. explain their effects.

4) a preferred stock has an annuity dividend of $5. The required return is 8%. what is the Vps?

a) why is preferred stock called preferred?

b) what is a financial Market?

d) identity and briefly explain some of the key features of common stock.

5. what are the two primary reasons for the existence of the preemptive right?

a) what are the two parts of most stocks' expected total return?

b) explain the following: preferred stock is a hybrid security?

c) is the equation used to value preferred stock more like the one used to evaluate a perpetual bond or the one used for common stock?

6. what are the general characteristics of debt?

a) a bond that matures in 6 years has a par value of $1000 an annuity coupon payment of $80 and a market interest rate of 9%. what is its price?

b) an afrogates industries bond has a 10% coupon rate and a $1000 face value: interest is paid semiannually, and the bond has 20 years to maturity. if investors require a 12% yield, what is the bond's value? what is the effective annuity yield on the bond?

c) differentiate between term loans and bonds.