Principles of corporate finance revision
Questions:
Choose the right alternative
1. A business owned by a single individual is called a(n):

corporation.

open structure.

partnership.

sole proprietorship.

closed receivership
2. We multiple a given future value by this in order to get its present value
equivalent.

Present value

Discount rate

Discounted value

Discount factor
3. The future value interest factor is calculated as:

1+r–t

(1 + rt)

(1 + r)(t)

(1 + r)t
4. Given r and t greater than zero,

future value interest factors are less than one.

present value interest factors are less than one.

present value interest factors are greater than future value interest factors

present value interest factors decrease as t grows
5. The purchase and sale of securities after the original issuance occurs in the:

primary market.

Financial market

secondary market.

Monetary market
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Exercises:
1. 4 years ago, an account was opened with $1200. Today, the account balance is
$1632. If the account paid interest compounded annually. What rate of return
are you earning?
2. you put $35,000 into a bank account earning 4%. You can't withdraw the
money until the balance has doubled. How long will you have to leave the
money in the account?

20 years

19 years

18 years

17 years

16 years
3. If a principal of $800 amounts to $1000 after five years of investment, then
what annual interest rate is being received?(compound interest)

6.45%

5.23%

4.01%

4.56%
4. How long would it take $ 600 to double in value if the simple interest rate
were 4.2% per year?
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