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1. Which of the following statements is most correct?

a.If an investment pays 10 percent interest compounded annually, its effective rate will also be 10 percent.

b.All the statements are correct.

c.A 5-year $100 annuity due will have a higher present value than a 5-year $100 ordinary annuity.

d.A 15-year mortgage will have larger monthly payments than a 30-year mortgage of the same amount and same interest rate.

QUESTION 2

If the annually compounded interest rate is 6%, what is the approximate Present Value of $4,000 to be received 7 years from today?

a.$2,660

b.$8,780

c.$6,210

d.$5,000

e.None of the answers is correct

QUESTION 3

Let the nominal annual interest rate be 13% and be compounded quarterly. What is the APY and what is the quarterly periodic rate?

a.13.65%, 3.25%

b.12.98%, 3.25%

c.13.25%, 3.82%

d.14.1%, 3.11%

QUESTION 4

A financial instrument that you own promises an annual payment at the end of every year for eternity. The first payment you will receive will equal $2,000. Payments will grow at an annual 2.3%. If the annually compounded discount rate is 7.3%, what is the value of your instrument today?

a.$30,000

b.None of the answers is correct

c.$50,000

d.$20,000

e.$40,000

QUESTION 6

If the continuously compounded rate is 5%, what is the approximate FV of $2,500 in 9 years from today?

a.$4,250

b.$1,000

c.None of the answers is correct

d.$3,921

e.$1,500