Module 2 Quiz :Introduction to Corporate Finance (Business Foundations Specialization) Answers 2026

Question 1

What is the periodic (monthly) interest rate?

❌ 0.0394
✅ 0.0032
❌ 0.0013
❌ 0.0129

Explanation:
Monthly rate = APR / 12 = 0.0387 / 12 ≈ 0.0032

Question 2

What is the effective annual rate (EAR) on the loan?

❌ 1.0394
❌ 2.0394
❌ 2.1239
✅ 0.0394

Explanation:
EAR = (1 + 0.0387/12)¹² − 1 ≈ 0.0394 (3.94%)

Question 3

What is the monthly mortgage payment?

❌ 757.95
❌ 1,879.80
✅ 1,895.85
❌ 751.92

Explanation:
Mortgage payment (annuity formula):
CF = PV × (R/k) / [1 − (1 + R/k)^(−T×k)]
= 400,000 × (0.0387/12) / [1 − (1.003225)^(−360)]
≈ 1,895.85

Question 4

How much will you have after 1 year in a 5% APR CD with semi-annual compounding?

❌ 120.00
❌ 118.54
❌ 125.32
✅ 105.06

Explanation:
FV = 100 × (1 + 0.05/2)² = 105.06

Question 5

How much will you have after 2 years?

❌ 1,215.51
✅ 1,103.81
❌ 902.50
❌ 814.50

Explanation:
FV = 1,000 × (1 + 0.05/2)⁴ = 1,103.81

Question 6

What is the effective annual rate (EAR)?

❌ 0.0250
❌ 0.0975
✅ 0.0506
❌ 1.1025

Explanation:
EAR = (1 + 0.05/2)² − 1 = 0.0506 (5.06%)

Question 7

Approximate 5-year borrowing cost for highly rated corporate borrowers

❌ 0.00%
✅ 2.27%
❌ 1.50%
❌ 3.54%
❌ None of the answers are correct

Explanation:
From the yield curve, the 5-year AAA corporate rate ≈ 2.27%.

Question 8

Approximate 20-year borrowing cost for highly rated corporate borrowers

❌ None of the answers are correct
❌ 1.50%
❌ 0.00%
❌ 3.54%
✅ 4.66%

Explanation:
The 20-year point on the corporate yield curve is approximately 4.66%.

Question 9

Annual yield-to-maturity of the zero-coupon bond

✅ 0.0057
❌ 2.0057
❌ −0.0057
❌ 1.0057

Explanation:
YTM = (100 / 99.43) − 1 ≈ 0.0057 (0.57%)

Question 10

What should the price of the bond be?

❌ 1,223.46
❌ 1,246.37
❌ 1,156.30
✅ 1,177.44

Explanation:
Price = 100 / 1.01 + 1,100 / (1.02)²
= 99.01 + 1,078.43
= 1,177.44

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