Which of the following statements is CORRECT?
A. The present value of a 3-year, $150 ordinary annuity will exceed the present value of a 3-year, $150 annuity due.
B. If a loan has a nominal annual rate of 8%, then the effective rate will never be less than 8%.
C. If a loan or investment has annual payments, then the effective, periodic, and nominal rates of interest will all be different.
D. The proportion of the payment that goes toward interest on a fully amortized loan increases over time.
E. An investment that has a nominal rate of 6% with semiannual payments will have an effective rate that is smaller than 6%.
Answer: B
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What will be an ideal response?
Coral Inc.'s preferred stock currently sells for $90 a share and pays a dividend of $10 per share; however, the firm will net only $80 per share from the sale of new preferred stock. What is the firm's cost of newly issued preferred stock? (Round off the answer to two decimal places.)?
A. ?11.15 percent B. ?12.50 percent C. ?16.45 percent D. 10.52 percent? E. ?13.46 percent
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Answer the following statement true (T) or false (F)