Question
6.If you prefer a financial asset with the highest present value, which of the following would you prefer? A.$1,050today B.$1,240 to be received in 3
6.If you prefer a financial asset with the highest present value, which of the following would you prefer?
A.$1,050today
B.$1,240 to be received in 3 years when rates are 5.75%
C.$1,355 to be received in 5 years when rates are 5.25%
D.$1,525 to be received in 8 years when rates are 4.75%
E.$1,590 to be received in 10 years when rates are 4.25%
7.An appliance store sells a refrigerator for $1,200 and gives their customers a full three years, interest-free,to pay for the refrigerator. If interest rates are 5%, what is the equivalent sales price of the refrigerator when the customer takes the full three years to pay for it?
A.more than $1,389
B.$1,389
C.$1,200
D.$1,104
E.$1,037
8.Compute the present value of $3,000 paid in four years using the following discount rates: 3.0% in year 1, 4.0% in year 2, 5.0% in year 3, and 6.0% in year 4.
A.$2,516
B.$2,500
C.$2,491
D.$2,109
E.$1,999
9.What is the combined value in year 3 of a $1,000 cash flow made in year 7, a $1,500 cash flow made in year 10 and a $2,000 cash flow made in year 15 when interest rates are 12.25percent?
A.$2,018
B.$1,859
C.$1,798
D.$1,725
E.$1,271
10.What annual rate of return is earned on a $8,950 investment that grows to $19,765 in eight years?
A.10.05%
B.10.41%
C.11.09%
D.11.73%
E.12.29%
11.Assume you borrow $500 from a payday lender. The terms are that you must pay a fee of $97 in advance (today) and one year from now you need to repay $785. What implied interest rate are you paying?
A.43.09%
B.57.00%
C.76.47%
D.81.23%
E.94.79%
12.A stock investor deposited $3,450 six years ago. Today the account is valued at $2,180. What annual rate of return has this investor earned?
A.6.65%
B.7.37%
C.8.45%
D.9.74%
E.less than 9.74%
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