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: ..

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: ..

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: ..

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: ..

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: ..

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: ..

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: ..

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: ..

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: ..

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: ..

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: ..

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: ..

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: ..

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: ..

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: ..