Question
What is the value of a U.S. Treasury bond maturing in 8 years with a $1,000 face value and a 7% coupon to an investor
What is the value of a U.S. Treasury bond maturing in 8 years with a $1,000 face value and a 7% coupon to an investor who requires a 7% rate of return?
A. | $ 417.99.
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B. | $ 582.01.
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C. | $1,000.00. | |
D. | $1,417.99.
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2.
The required rate of return of professional investors:
A. | Is higher than the required rate of return of non-professional investors.
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B. | Does not enter the cost of capital calculation.
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C. | Can be determined by asking them.
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D. | Is impossible to determine. |
3.
Cash flows are used instead of accrual accounting numbers in capital budgeting for all the following reasons except:
A. | Financial value comes from cash flows.
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B. | Accrual accounting numbers match revenues and expenses with economic events
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C. | There are alternative accounting treatments for some events.
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D. | GAAP rules are made by people and can change. |
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