Corporate Finance Nptel Week 2 Assignment Answers
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Corporate Finance Nptel Week 2 Assignment Answers (July-Dec 2025)
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Question 1. The longer the time period or the higher the interest rate:
a) Lower the future value
b) Higher the present value
c) Lower the present value
d) Lower the opportunity cost
These are Corporate Finance Nptel Week 2 Assignment Answers
Question 2. Which bond type does not pay interest periodically?
a) Convertible bond
b) Pure-discount bond
c) Callable bond
d) Coupon bond
Question 3. Discounting technique is used to find out:
a) Terminal Value
b) Compounded Value
c) Present Value
d) Future Value
Question 4. Which factor increases the value of a perpetuity?
a) Decreasing the periodic payment
b) Increasing the discount rate
c) Decrease in discount rate
d) None of the above
These are Corporate Finance Nptel Week 2 Assignment Answers
Question 5. By increasing the number of compounding periods in a year, while holding the stated annual interest rate constant, you will____
a) Decrease the effective annual rate
b) Increase the effective annual rate
c) Not change the effective annual rate
d) Increase the dollar return on an investment but will decrease the effective annual rate
Question 6. How much will Rs. 45,000 grow into in 12 years if you earn a 15% interest rate approximately?
a) Rs. 1,95,102
b) Rs. 2,40,761
c) Rs. 2,90,289
d) Rs. 2,87,112
Question 7. A bond that is trading above its face value because its coupon rate is higher than the prevailing market interest rate is known as a ____________.
a) Zero-coupon bond
b) Convertible bond
c) Premium bond
d) Callable bond
These are Corporate Finance Nptel Week 2 Assignment Answers
Question 8. Consider a perpetuity paying Rs 2000 a year. If the relevant discount rate is 8%. What is the value of the perpetuity today?
a) 12,500
b) 25,000
c) 24,000
d) 20,000
Question 9. Calculate approx. Effective Annual Rate for a 25% interest rate with monthly compounding.
a) 40.78%
b) 15.87%
c) 19.25%
d) 28.07%
Question 10. What is the approximate present value of Rs 16000 to be received in 12 years? The discount rate is 15%.
a) Rs. 2991
b) Rs. 3245
c) Rs. 5598
d) Rs. 2000
These are Corporate Finance Nptel Week 2 Assignment Answers
Question 11. You want to buy an ordinary annuity that will pay you $6,000 a year for the next 15 years. You expect annual interest rates will be 7 percent over that time period. The maximum price you would be willing to pay for the annuity is closest to:
a) $66,000
b) $54,500
c) $62,000
d) $65,000
Question 12. If a bond is selling for less than its face value, it is said to be selling at:
a) A premium
b) A discount
c) Par
d) None of the above
Question 13. Relationship between annual nominal rate of interest and annual effective rate of interest, if frequency of compounding is greater than one:
a) Effective rate > Nominal rate
b) Effective rate < Nominal rate
c) Effective rate = Nominal rate
d) None of the above
Question 14. The nominal rate is 10%. Which compounding frequency will give the highest effective annual rate?
a) Monthly
b) Quarterly
c) Annually
d) Semi-annually
Question 15. The present value of an ordinary annuity can be calculated using which formula?
a) PV = P × (1 − (1 + r)^−n) / r
b) PV = P × (1 − (1 + r)^−n)
c) PV = P × ((1 + r)^n)
d) PV = P × (1 + r) × n
Question 16. If a firm reinvests all earnings and pays no dividends, the value of the stock using the Dividend Discount Model would be:
a) Zero
b) Infinite
c) Equal to EPS
d) Cannot be determined
Question 17. A stock is expected to pay a dividend of $10 next year. If the required rate of return is 10% and the dividends are not expected to grow, what is the value of the stock according to the Dividend Discount Model (specifically, the Gordon Growth Model with a 0% growth rate)?
a) $120
b) $85
c) $90
d) $100
These are Corporate Finance Nptel Week 2 Assignment Answers
Question 18. Time value of money supports the comparison of cash flows recorded at different time period by
a) Discounting all cash flows to a common point of time
b) Compounding all cash flows to a common point of time
c) Using either a or b
d) None of the above.
Question 19. The nominal annual interest rate is 24%. What is the approximate difference in the effective annual interest rate when compounded quarterly versus semi-annually?
a) 0.55%
b) 0.997%
c) 0.68%
d) 0.81%
Question 20. Suppose Omega Corp. decides to cut its dividend pay-out rate to 40% to invest in new projects as part of its growth plans. The return on these new investments will be 15%. The expected earnings per share (EPS) this year is Rs. 8, and the cost of equity capital is 18%. Given this information, what shall be the current share price of the company?
a) Rs. 40.25
b) Rs. 56.25
c) Rs. 38.76
d) None of the above
These are Corporate Finance Nptel Week 2 Assignment Answers