Financial Management

✅ The correct answer is B.
Payment if it is divided with interest rate will be formula of present value of perpetuity. A perpetuity is a type of annuity that receives an infinite amount of periodic payments. An annuity is a financial instrument that pays consistent periodic payments. As with any annuity, the perpetuity value formula sums the present value of future cash flows.

✅ The correct answer is A.
The formula for cost of debt is I x ( 1 – t).

✅ The correct answer is A.
Input call parity relationship, present value of exercise price is added to call option which is equal to put option stock. A put or put option is a stock market device which gives the owner the right, but not the obligation, to sell an asset (the underlying), at a specified price (the strike), by a predetermined date (the expiry or maturity) to a given party (the seller of the put).

✅ The correct answer is C.
Lottery payoffs and payment for rental apartments are examples of annuity due. An annuity due is a repeating payment that is made at the beginning of each period, such as a rent payment.

✅ The correct answer is C.
Beta coefficient is used to measure market risk which is an index of stock market volatility. In the securities markets, volatility is often associated with big swings in either direction. For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a “volatile” market.

✅ The correct answer is C.
A schedule which shows interest constitutes reduced principal and unpaid balance is considered as amortization schedule. An amortization schedule is a complete table of periodic loan payments, showing the amount of principal and the amount of interest that comprise each payment until the loan is paid off at the end of its term.

✅ The correct answer is A.
Corporate associations who have common bonds being employees of same firm are classified as credit unions. A credit union is a type of financial cooperative that provides traditional banking services.

✅ The correct answer is D.
A stock which is hybrid and works as a cross between debt and common stock is considered as preferred stock. Preferred stockholders have a higher claim to dividends or asset distribution than common stockholders.

✅ The correct answer is D.
Rate of return which is asked by investors is classified as weighted average cost of capital. The weighted average cost of capital (WACC) is a calculation of a firm’s cost of capital in which each category of capital is proportionately weighted. All sources of capital, including common stock, preferred stock, bonds, and any other long-term debt, are included in a WACC calculation.

✅ The correct answer is D.
Sum of market risk and diversifiable risk are classified as total risk which is equivalent to variance.