1.Last National Bank is offering you a loan at 12%; payments on the loan are to be made annually. Credit Union is offering you a loan where payments are to be made semi-annually; the rate on the loan is also 12%. Local Bank down the street is also offering a loan at 12% where the payments are made quarterly. Which loan has the lowest effective annual rate?

a. Last National Bank's loan

b. All of the loans will have the same effective annual rate.

c. Credit Union's loan

d. Local Bank's loan

2.Payments of $200 a month for 36 months are defined as a(n):

a. perpetuity.

b. consol.

c. discounted cash flow.

d. ordinary cash flow.

e. annuity.

3. Which one of the following has the highest effective annual rate?

a. 7 percent compounded monthly

b. 7 percent compounded quarterly

c. 7 percent compounded semi-annually

d. 7 percent compounded daily

e. 7 percent compounded annually

4.You deposit $400 today, $600 one year from now, and $800 five years from now into an account that earns 4% compounded annually. How much money will you have 11 years from now? (Round to the nearest whole dollar)

$2,429

$2,384

$2,516

$3,316

$1,872

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5.If you invest $300 every six months at 6 percent compounded semi-annually, how much would you accumulate at the end of 15 years?

$14,273

$11,259

$17,725

$15,908

6.You charged $4000 on your credit card for holiday gifts. Your credit card company charges you 9% annual interest, compounded monthly. If you make the minimum payments of $70 per month, how long will it take (to the nearest month) to pay off your balance?

68 months

72 months

75 months

80 months

7.You decide to borrow $350000 to build a new home. The bank charges an interest rate of 6% compounded monthly. If you pay back the loan over 30 years, what will your monthly payments be (rounded to the nearest dollar)?

$2,337

$2,098

$2,410

$1,874

8.Dustin is considering an investment that will pay $3000 a year for 5 years, starting 1 year from today (which is normal). How much should Dustin pay for this investment today if he wishes to earn a 7 percent annual rate of return?

$15,989

$12,300.59

$15,418.76

$14,366.08

$11,750.23

9.Dollar, Inc. wants to offer preferred stock for sale at a price of $40 a share. The company wants its investors to earn an 6 percent rate of return. What is the minimum annual dividend the firm will need to pay per share?

$2.53

$2.22

$3.70

$2.40

$3.02

10.Steven can afford car payments of $300 a month for 72 months. The bank will lend him this money at 8 percent interest. How much can Steven borrow today?

$20,770.57

$20,747.52

$17,110.36

$17,224.43

$15,428.14

11.A scholarship provider has $500000 which she will invest today to fund a scholarship forever. She expects to earn 5% on her money each year. If she wants to begin paying out the scholarship starting today, what will the annual scholarship payment be?

$24,318

$23,810

$25,664

$22,509

12.What is the effective annual rate of 7.85 percent compounded monthly?

9.27%

8.84%

8.63%

8.14%