# Module 2 Quiz Introduction to Corporate Finance

### Module 2 Quiz Introduction to Corporate Finance

1.50\%

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# Module 2 Quiz Introduction to Corporate Finance

### Module 2 Quiz Introduction to Corporate Finance

0.00130.0013
0.03940.0394
0.01290.0129

2.12392.1239
2.03942.0394
0.03940.0394
1.03941.0394

757.95757.95
1,895.851,895.85
751.92751.92
1,879.801,879.80

105.06105.06
120.00120.00
118.54118.54
125.32125.32

1,102.501,102.50
1,215.511,215.51
814.50814.50
902.50902.50

1.10251.1025
0.02500.0250
0.09750.0975
0.10250.1025

*Based on the yield curves in the figure, what is the approximate cost of borrowing for highly rated corporate borrowers over a 5-year term?*
None of the answers are correct
0.00\%0.00%
2.27\%2.27%
3.54\%3.54%
1.50\%1.50%

*Based on the yield curves in the figure, what is the approximate cost of borrowing for highly rated corporate borrowers over a 20-year term?*
3.54\%3.54%
0.00\%0.00%
1.50\%1.50%
4.66\%4.66%
None of the answers are correct

What is the annual yield-to-maturity of the bond? (I.e., what is the discount rate one needs to use to get the price of the bond given the future cash flow of $$100$ in one year?)

1.00571.0057
2.00572.0057
-0.0057−0.0057
0.00570.0057

You notice that the yield-to-maturity on a one year-zero coupon treasury bond is $1%$ and the yield-to-maturity on a two year-zero coupon treasury bond is $2%$. What should the price of your bond be?

1,246.371,246.37
1,177.441,177.44
1,223.461,223.46
1,156.301,156.30
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1. You have just purchased a home by borrowing $$400,000$ for 30-years at a fixed APR of $3.87%$. The loan payments are monthly and interest is compounded monthly.

What is the periodic interest rate? (I.e., what is the monthly interest rate?)

1 point

2. You have just purchased a home by borrowing $$400,000$ for 30-years at a fixed APR of $3.87%$. The loan payments are monthly and interest is compounded monthly.

What is the effective annual rate on the loan? (I.e., what is the interest rate once we take into account compounding?)

1 point

3. You have just purchased a home by borrowing $$400,000$ for 30-years at a fixed APR of $3.87%$. What is the monthly mortgage payment?

(Hint: A mortgage is just an annuity where the borrowed amount is the present value of the annuity.

So, use the annuity formula, but solved for the cash flow in terms of the present value:

CF = $(−(+Rk))(−T×k)PV×Rk $

1 point

4. You invest $$100$ into a CD offering 5% APR with semi-annual compounding (i.e., two times per year).

How much money will you have in the account after 1 year?

1 point

5. You put $$1,000$ into a savings account today that offers a $5%$ APR with semi-annual compounding (i.e., two times per year).

How much money will you have in the account after 2 years?

1 point

6. You put $$1,000$ into a savings account today that offers a $5%$ APR with semi-annual compounding (i.e., two times per year).

What is the effective annual rate of the saving account?

1 point

7. Consider the following figure that presents three yield curves:

1 point

8. Consider the following figure that presents three yield curves:

1 point

9. A one-year zero coupon bond costs $$99.43$ today. Exactly one year from today, it will pay $$100$.

1 point

10.You have a treasury bond that pays $$100$ one year from today and $$1,100$ two years from today.

1 point

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