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6. Generally, an increase in risk will result in point) required return or interest rate. (4 A) a lower B) a higher C) an unchanged D) an undetermined 7. Find the present value of the following stream of cash flows, assuming that the firm's opportunity cost is 25 percent. (Gpoint) Year 1 2 3 Amount $5,000 25,000 14,000 A. $27,168 B. $35,200 C. $34,000 D. $32,000 8. The future value of an ordinary annuity of $2,000 each year for 10 years, deposited at 12 percent, is: (5 point) A) $35,098 B) $20,000 C) $39,310 D) $11,300 9. The present value of an ordinary annuity of $2,350 each year for eight years, assuming an opportunity cost of 11 percent, is: (6 point) paying semiannual interest of 6 percent is (5 point) A) $1,020 B) $27,869 C) $18,800 D) $12,093 A) $450. B) $126. C) $889. D) $134. 10. Dan plans to fund his individual retirement account (IRA) with the maximum contribu- tion of $2,000 at the end of each year for the next 10 years. If Dan can earn 10 percent on his contributions, how much will he have at the end of the tenth year? (6 point) 19. The present value of a $25,000 perpetuity at a 14 percent discount rate is: (5point) A. $178,571 B. $285,000 C. $350,000 D. $219,29 A) $12,290 B) $20,000 C) $31,874 D) $51,880 20. Nico Nelson, a management trainee at a large New York-based bank is trying to estimate the real rate of return expected by investors. He notes that the 3-month T-bill currently yields 3 percent and has decided to use the consumer price index as a proxy for expected in- flation. What is the estimated real rate of interest if the CPI (Inflation) is currently 2 per- cent? (5 point) 11. Mary will receive $12,000 per year for the next 10 years as royalty for her work on a finance book. What is the present value of her royalty income if the opportunity cost is 12 percent? (6 point) A) $120,000 B) $ 67,800 C) $ 38,640 D) None of the above. A) 5% B) 1% C) 3% D) 2 21. Find the future value at the end of year 3 of the following stream of cash flows re- ceived at the end each year, assuming the firm can earn 8 percent on its investments.( 6 point) 12. The present value of $100 received at the end of year 1, $200 received at the end of year 2, and $300 received at the end of year 3, assuming an opportunity cost of 13 per- cent, is (5 point) Year 1 2 3 A) $ 453 B) $ 416. C) $1,181. D) $ 500. Amount $10,000 16,000 19,000 A. $45,000 B. $53,396 C. $47,940 D. $56,690 13. The future value of $100 received today and deposited in an account for four years 22. A firm has an issue of $1,000 par value bonds with a 9 percent stated interest rate (cou- pon rate) outstanding. The issue pays interest annually and has 20 years remaining to its ma- turity date. If bonds of similar risk (market risk) are currently earning 11 percent, the firm's bond will sell for today. (6 point) 23. What is the yield to maturity, to the nearest percent, for the following bond: current price is $908, coupon rate is 11 percent, $1,000 par value, interest paid annually, eight years to maturity? (6 point) A) 11 percent B) 12 percent C) 13 percent D) 14 percent a 24. The value of a bond is also called its face value. Bonds which sell at less than face value are priced at a , while bonds which sell at greater than face value sell at _- (4 point) A) discount; par; premium B) premium; discount; par C) par; discount; premium D) coupon; premium; disco 25. A firm has an issue of $1,000 par value bonds with a 12 percent stated interest rate (Coupon rate) outstanding. The issue pays interest annually and has 10 years remaining to its maturity date. If bonds of similar risk are currently earning 8 percent, the firm's bond will sell for today. ( point) A) $1,000 B) $805.20 C) $1,115.50 D) $1,268.40

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