Pv of a perpetuity - Study guides, Class notes & Summaries

Default Risk - correct answer.Risk that a borrower will not make promised payments Liquidity Risk - correct answer.Risk of recieving less than fair value for an investment if it must be sold for cash quickly Required Interest Rate on A Security - correct answer.= Nominal Interest Rate + Default Risk Premium + Liquidity Premium + Maturity Risk Premium Real Risk Free Rate / Nominal Risk Free Rate - correct answer.- Single period interest rate for a completely risk-free security with no...

CFIN 6 TEST QUESTIONS WITH ALL CORRECT ANSWERS Which of the following statements are true about relevant cash flow valuations: a. they consider the target to be a going concern, b. they allow for the obligations to debt holders, c. no two investments can be analyzed using the same hurdle rate - Answer- a b and c In order to use a cash flow in perpetuity as a residual value for an asset, it must be reasonable assumed that the cash flow from that asset has leveled off (T/F) - Answer- true ...

CFIN 6 EXAM NEWEST 2024 ACTUAL EXAM TEST BANK COMPLETE QUESTIONS AND CORRECT ANSWERS Which of the following statements are true about relevant cash flow valuations: a. they consider the target to be a going concern, b. they allow for the obligations to debt holders, c. no two investments can be analyzed using the same hurdle rate - Answer-a b and c In order to use a cash flow in perpetuity as a residual value for an asset, it must be reasonable assumed that the cash flow from that asset h...

The interest rate is 10%. What is the PV of an asset that pays $1 a year in perpetuity? - ANS $10 The interest rate is 10%. A piece of land produces an income that grows by 5% per annum. If the first year's income is $10,000, what is the value of the land? - ANS $200,000 You are considering the purchase of one the following two stocks. Both stocks currently sell for $10 per share and each stock's dividends will grow at rate g forever. Assume you plan to hold onto the ...

3 investments, each pay 100 mo, with an 8% interest rate. one is an ordinary annuity, one is an annuity due, and the third is a perpetuity. which statement is correct given these three options? - ️️present value of a perp has to be higher than the present value either the ordinary annuity or annuity due A bond trader just purchased and resold a bond. The amount of profit earned by the trader from this purchase and resale is...... - ️️bid-ask spread A firm decides to make a decision tha...

MGT 8803 Financial Management Latest 2023 Rated A Shareholders owners of a corporation; residual claimants Primary Financial Goal of Public Corporation To create economic value for its shareholders Capital Budgeting/Expenditure/Investment Decision process of determining exactly which assets to invest in and how much to invest Future Value = PV x (1+r)^t Present Value amount of money you would need to invest today in order to duplicate some future dollar amount = FV / (1+r)^t Net Present Val...

Fair price of a financial asset - correct answer The PV of all expected future CFs associated with the asset PV of Multiple CFs - correct answer Can calculate by discounting each CF separately and then summing Annuity - correct answer equally spaced, level stream of CFs for a specified finite time Perpetuity - correct answer ...

CFA Level 1 Formulas question with complete solution graded A+ Already passedPrice change based on convexity - correct answer -duration(change in yield)+1/2(convexity)(change in yield)^2 Effective Duration - correct answer Required if a bond has embedded options: [(v-)-(v+)]/[2V0(change in curve)] Modified Duration - correct answer [(v-)-(v+)]/[2V0(change in yield)] Future Value - correct answer PV(1+(I/Y)^N) PV - correct answer FV/(1+r)^n PV of perpetuity - correct answer PMT / d...

CFA Level 1 Formulas question & answers rated A+ already passedPrice change based on convexity - correct answer -duration(change in yield)+1/2(convexity)(change in yield)^2 Effective Duration - correct answer Required if a bond has embedded options: [(v-)-(v+)]/[2V0(change in curve)] Modified Duration - correct answer [(v-)-(v+)]/[2V0(change in yield)] Future Value - correct answer PV(1+(I/Y)^N) PV - correct answer FV/(1+r)^n PV of perpetuity - correct answer PMT / discount rate ...