Financial Management - Study Mode

[#311] An annuity with an extended life is classified as
Correct Answer

(B) perpetuity

Explanation

Solution: An annuity with an extended life is classified as perpetuity. A perpetuity is an annuity that has no end, or a stream of cash payments that continues forever. There are few actual perpetuities in existence.

[#312] Periodic rate if it is multiplied with per year number of compounding periods is called
Correct Answer

(D) nominal annual rate

Explanation

Solution: Periodic rate if it is multiplied with per year number of compounding periods is called nominal annual rate. The nominal interest rate is the interest rate before taking inflation into account, in contrast to real interest rates and effective interest rates.

[#313] Net income and depreciation is Rs 313,650,000 and common shares outstanding are 55,000,000 then cash flow per share would be
Correct Answer

(A) Rs 5.70

Explanation

Solution: Cash Flow per Share = Net Income / Shares Outstanding = 313650000 / 55000000 = Rs. 5.70

[#314] Finance company providing loans at 3% with five compounding periods per year, nominal annual rate is classified as
Correct Answer

(A) 15.00%

Explanation

Solution: Finance company providing loans at 3% with five compounding periods per year, nominal annual rate is classified as 15.00% i.e, 3% × 5 = 15.00%.

[#315] Values of assets purchased or liabilities recorded as recorded by bookkeepers are considered as
Correct Answer

(D) book values

Explanation

Solution: Values of assets purchased or liabilities recorded as recorded by bookkeepers are considered as book values. Book value is also the net asset value of a company calculated as total assets minus intangible assets (patents, goodwill) and liabilities.