1) An investor will invest $1,000 now and expect to receive $10 for each of the next 10 years plus $1,000 at the end of

[answerhappygod]

1) An investor will invest $1,000 now and expect to receive $10
for each of the next 10 years
plus $1,000 at the end of the 10th year. Her cash flow at time
period 0 is
A) $1,000.
B) -$1,000.
C) $-990.
D) $1,010.
Answer: ……………………………………………………………………..
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2) At 8% compounded annually, how long will it take $750 to
double?
A) 6.5 years
B) 48 months
C) 9 years
D) 12 years
Answer: ……………………………………………………………………..
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3) At what rate must $400 be compounded annually for it to grow
to $716.40 in 10 years?
A) 6%
B) 5%
C) 7%
D) 8%
Answer: ……………………………………………………………………..
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4) A friend plans to buy a big-screen TV/entertainment system
and can afford to set aside
$1,320 toward the purchase today. If your friend can earn 5.0%,
compounded yearly, how much
can your friend spend in four years on the purchase? Round off
to the nearest $1.
A) $1,444
B) $1,604
C) $1,764
D) $1,283
Answer: ……………………………………………………………………..
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5) You just purchased a parcel of land for $10,000. If you
expect a 12% annual rate of return on
your investment, how much will you sell the land for in 10
years?
A) $25,000
B) $31,060
C) $38,720
D) $34,310
Answer: ……………………………………………………………………..
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Chapter 6
1) You wish to borrow $2,000 to be repaid in 12 monthly
installments of $170.30. The annual
interest rate is
A) 24%.
B) 4%.
C) .04%.
D) 22%.
Answer: ……………………………………………………………………..
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2) If you have $20,000 in an account earning 8% annually, what
constant amount could you
withdraw each year and have nothing remaining at the end of five
years?
A) $3,525.62
B) $5,008.76
C) $3,408.88
D) $2,465.78
Answer: ……………………………………………………………………..
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3) A commercial bank will loan you $17,500 for two years to buy
a car. The loan must be repaid
in 24 equal monthly payments. The annual interest rate on the
loan is 6% of the unpaid balance.
What is the amount of the monthly payments?
A) $1,394.98
B) $688.11
C) $3779.39
D) $775.61
Answer: ……………………………………………………………………..
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4) Your company has received a $50,000 loan from an industrial
finance company. The annual
payments are $6,202.70. If the company is paying 9% interest per
year, how many loan
payments must the company make?
A) 15
B) 13
C) 12
D) 19
Answer: ……………………………………………………………………..
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5) Gina Dare, who wants to be a millionaire, plans to retire at
the end of 40 years. Gina's plan is
to invest her money by depositing into an IRA at the end of
every year. What is the amount that
she needs to deposit annually in order to accumulate $1,000,000?
Assume that the account will
earn an annual rate of 11.5%. Round off to the nearest $1.
A) $1,497
B) $5,281
C) $75
D) $3,622
Answer: ……………………………………………………………………..
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Chapter 9
1) LIBOR last week was 1.88%, this week it is 1.91%. SC Corp.
has borrowed $1,000,000
from North Pole Bank at a rate of one half a percentage point
above LIBOR with cap of 2.5%
and a floor of 2.0%. What interest was charged to SC last
week?
A) 2.48%
B) 2.38%.
C) 2.0%
D) 2.5%
Answer: ……………………………………………………………………..
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2) A $1,000 par value 10-year bond with a 10% coupon rate
recently sold for $900. The yield to
maturity
A) is 10%.
B) is greater than 10%.
C) is less than 10%.
D) cannot be determined.
Answer: ……………………………………………………………………..
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3) The Blackburn Group has recently issued 20-year, unsecured
bonds rated BB by Moody's.
These bonds yield 443 basis points above the U.S. Treasury yield
of 2.76%. The yield to
maturity on these bonds is
A) 4.43%.
B) 7.19%
C) 12.23%
D) mortgage bonds.
Answer: ……………………………………………………………………..
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4) Colby & Company bonds pay semiannual interest of $50.
They mature in 15 years and have
a par value of $1,000. The market rate of interest is 8%. The
market value of Colby bonds is
(round to the nearest dollar)
A) $1,173.
B) $743.
C) $1,000.
D) $827.
Answer: ……………………………………………………………………..
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5) Caldwell, Inc. sold an issue of 30-year, $1,000 par value
bonds to the public. The bonds
carry a 10.85% coupon rate and pay interest semiannually. It is
now 12 years later. The current
market rate of interest on the Caldwell bonds is 8.45%. What is
the current market price
(intrinsic value) of the bonds? Round off to the nearest $1.
A) $751
B) $1,177
C) $1,220
D) $976
Answer: ……………………………………………………………………..
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