1. (Multiple Choice)Assume you owe a large balance on your credit card and only pay the monthly minimum payment equal to 1% of the balance. If the annual interest rate on the credit card is 18%, how many years will it take you to pay off the balance assuming you do not make any additional charges to the card?

7.8 years

5 years

You will never pay off the balance.

Not enough information is provided to determine the time.

2. Marginal tax rate is the

average rate for your total income.

lowest rate applied to your taxable income.

rate applied to your last dollar of taxable income.

None of these is correct.

3. If you purchase a bond that matures in 5 years but you may have to cash it in before that time, you are exposed to

A. liquidity risk.

B. default risk.

C. interest rate risk.

D. A and C are both correct.