1. A 20-year annuity immediate pays 100 the first year and increases by 100 a year through year 10. Starting in year 11 each yearly payment is 5% greater than the previous payment. The annuity earns 6.8% annually. What is the present value of this annuity? 817 5 b 835 . 0 c 829 . 0 d 823 . 9 e 839 . 5 a . 5 points 1. QUESTION 2 Linda buys a 30-year annuity-immediate with monthly l payments that earns 5.4% convertible monthly. The present value of the annuity is 10,000. At the end of 15 years the interest rate is increased to 6.3% convertible monthly. What will be her new monthly payments be? a 59.5 . 0 b 58.5 . 0 c 58.0 . 0 d 59.0 . 0 e 57.5 . 0 5 points QUESTION 3 1. An store advertises the following financing arrangement: "We don't offer you confusing interest rate. We will just divide your total cost by 10 and you can pay us that amount each month for a year." No payment needs on the date of sale, the first payment is due in the end of the month of the date of sale and the remaining eleven payments at monthly intervals thereafter. Calculate the effective annual interest rate the store's customers are paying on their loans a 54.9 . % b 45.5 . % c 41.3 . % d 51.2 . % e 35.1 . % 10 points QUESTION 4 1. $100, 000 loan is made Monthly interest-only repayments are made for 10 years, the first repayment occurring one month from today Level annual repayments of $9,456 are made for as long as needed to pay off the remaining balance of the loan, where the first annual repayment is made at the end of Year 11. The annual effective interest rate is 9.2% Calculate the total number of repayments necessary to pay off the loan. 1 13 . 3 2 14 . 0 3 14 . 7 4 15 . 4 5 16 . 1 5 points 1. QUESTION 5 Peter deposits 1000 into a saving account. For the first 5 years the money accumulates with a force of interest delta=0.04. For the next 3 years the money accumulates at a nominal discount rate of 6% convertible semiannually. At the end of 10 years the money has earned at an annually effective rate of 5.2%. What was the nominal interest rate convertible quarterly for the last 2 years? a 5.2 . % b 5.5 . % c 6.3 . % d 6.0 . % e 5.8 . % 5 points 1. QUESTION 6 A 1000 par value bond with coupons at 8% payable semiannually was called for 1100 prior to maturity. The bond was bought for 920 immediately after a coupon payment and was held to call. The nominal yield rate convertible semiannually was 10%. Calculate the number of years the bond was held. a 9.4 . b 12. . 4 c 6.4 . d 15. . 4 e 5.4 . 10 points 1. QUESTION 7 Elaine buys a 10-year 1000 par bond with 7.0% semi-annual coupons. The coupon payments are deposited into an account that pays 6.6% convertible semi-annually. After the 10th deposit the bank drops its rate to 5.8% convertible semi-annually. At the end of the 10 years period what is her annual yield for this investment? a 6.9 . % b 7.3 . % c 6.7 . % d 6.5 . % e 7.1 . % 10 points QUESTION 8 1. A man has a 30-year loan with level end of year payments. The principal repaid in year 5 is 159.68 and in year 10 is 213.73. What is the payment? 52 5 b 72 . 6 c 97 . 5 d 41 . 5 e 83 . 5 a . 10 points 1. QUESTION 9 Mattew pays $100,000 today for a 4-year investment that returns cash flows of $60,000 at the end of each earys 3 and 4. The cash flows can be reinvested at 4% per annum effective. If the rate of interest at which the investment is to be valued is 5%, what is the net present value of this investment today? 1 262 . 9 2 139 . 9 3 699 . 4 -699 . 5. 139 9 10 points QUESTION 10 1. Cathy purchased a 10-year par value bond with semiannual coupons at a nominal annual rate of 4% convertible semiannually at a price of 1050. The bond can be called at par value X on any coupon date starting at the end of year 5. The price guarantees that Cathy will receive a nominal annual rate of interest convertible semiannually of at least 6%. Calculate X. a 128 . 4 b 202 . 4 c 129 . 4 d 126 . 4 e 123 . 4 10 points QUESTION 11 1. John buys a house for with a 30-year 6.4% monthly payment mortgage for 150,000. After 12 years he refinances the house at a new rate of 5.8% and a new term of 10 years. What are his new monthly payments? a 132 . 2 b 135 . 4 c 133 . 8 d 134 . 6 e 133 . 0 10 points 1. QUESTION 12 Joe purchased a 20-year par value bond with semiannual coupons at a nominal annual rate of 10% convertible semiannually at a price of 1700.00. The bond can be called at par value 1100 on any coupon date starting at the end of year 15. What is the minimum yield that John could receive, expressed as a nominal annual rate of interest convertible semiannually? a 6.11 . % b 5.75 . % c 5.32 . % d 4.84 . % e 4.25 . % 10 points 1. QUESTION 13 ABC company buys an annual coupon bond maturing at 105 in 25 years. The company pays P to get a yield to maturity of 4% effective. The amortized amount on the bond in the 10th year is 1.00. Which of the follow is closest to P? a 13 . 2 b 13 . 4 c 13 . 3 d 13 . 0 e 13 . 1 10 points QUESTION 14 1. Brian borrows 10,000 for 10 years at an annual effective interest rate of 8%. He can repay this loan using the amortization method with payments of 1,600.00 at the end of each year. Instead, Brian repays the 10,000 using a sinking fund that pays an annual effective interest rate of 10%. The deposits to the sinking fund are equal to 1,600.00 minus the interest on the loan and are made at the end of each year for 10 years. Determine the balance in the sinking fund immediately after repayment of the loan. a 275 . 0 b 238 . 0 c 243 . 0 d 287 . 0 e 213 . 0 10 points 1. QUESTION 15 Alan buys a house for 150,000 with a mortgage rate of 5.8% convertible monthly. At the time of purchase he owns a 10,000 20-year zero coupon bond that earns 4.5% annually. The bond matures in 15 yeas. He would like to use the proceeds from the bond to make a payment larger than the usual fixed rate payment and pay off the balance of the mortgage after the 180th payment. How much should his monthly payments be? a 119 . 7 b 121 . 4 c 117 . 3 d 124 . 2 e 114 . 5 10 points QUESTION 16 1. A 10-year loan of 3000 is to be repaid with payments at the end of each year. It can be repaid under the following two options: (i) Equal annual payments at an annual effective rate of 8.00%. (ii) Installments of 300 each year plus interest on the unpaid balance at an annual effective rate of i. The sum of the payments under option (i) equals the sum of the payments under option (ii). Determine i. 8.90 % b 8.55 . % c 9.40 . % d 9.65 . % e 9.20 . % a . 10 points 1. QUESTION 17 100 is deposited into an investment account on Jan. 1, 2005. You are given the following information on investment activity that takes place during the year. Apr 19, 2005 Oct 30, 2005 value immediately prior to 95 105 deposit Deposit 2X X 2. The amount in the account on Jan 1, 2006 is 130. During 2005, the dollar-weighted return is 0% and the time-weighted return is k. Calculate k. a 0.0% . b. 2.25 % c 1.25 . % d. 1.25 % e. 1.95 % 10 points QUESTION 18 1. At the beginning of the year, an investment fund was established with an initial deposit of 1000. A new deposit of 600 was made at the end of 4 months. Withdrawals of 200 and 300 were made at the end of 6 months and 8 months, respectively. The amount in the fund at the end of the year is 1650. Calculate the dollar-weighted (money-weighted) yield rate earned by the fund during the year. 36.61 % b 45.83 . % c 30.20 . % d 41.40 . % e 27.57 . % a