Kindly show the working for the questions as well for better understanding.

QUESTION 1

Your child's orthodontist offers you two alternative payment plans. The first plan requires a $4,000 immediate up-front payment. The second plan requires you to make monthly payments of $137.41, payable at the end of each month for 3 years. What nominal annual interest rate is built into the monthly payment plan?

12.31%

12.96%

13.64%

14.36%

15.08%

QUESTION 2

You sold a car and accepted a note with the following cash flow stream as your payment. What was the effective price you received for the car assuming an interest rate of 6.0%?

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$5,987

$6,286

$6,600

$6,930

$7,277

QUESTION 3

Chuck has $2,500 invested in a bank that pays 4% annually. How long will it take for his funds to double?

14.39

15.15

15.95

16.79

17.67

QUESTION 4

Ellen now has $125. How much would she have after 8 years if she leaves it invested at 8.5% with annual compounding?

$205.83

$216.67

$228.07

$240.08

$252.08

QUESTION 5

Starting to invest early for retirement increases the benefits of compound interest.

True

False

QUESTION 6

Suppose you just won the state lottery, and you have a choice between receiving $2,550,000 today or a 20-year annuity of $250,000, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard taxes.

7.12%

7.49%

7.87%

8.26%

8.67%

QUESTION 7

What is the present value of the following cash flow stream at a rate of 12.0%?

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$9,699

$10,210

$10,747

$11,284

$11,849

QUESTION 8

At a rate of 6.5%, what is the future value of the following cash flow stream?

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$526.01

$553.69

$582.83

$613.51

$645.80

QUESTION 9

What's the future value of $1,200 after 5 years if the appropriate interest rate is 6%, compounded monthly?

$1,537.69

$1,618.62

$1,699.55

$1,784.53

$1,873.76

QUESTION 10

Suppose your credit card issuer states that it charges a 15.00% nominal annual rate, but you must make monthly payments, which amounts to monthly compounding. What is the effective annual rate?

15.27%

16.08%

16.88%

17.72%

18.61%

QUESTION 11

Suppose you borrowed $12,000 at a rate of 9.0% and must repay it in 4 equal installments at the end of each of the next 4 years. How large would your payments be?

$3,704.02

$3,889.23

$4,083.69

$4,287.87

$4,502.26

QUESTION 12

Suppose you are buying your first condo for $145,000, and you will make a $15,000 down payment. You have arranged to finance the remainder with a 30-year, monthly payment, amortized mortgage at a 6.5% nominal interest rate, with the first payment due in one month. What will your monthly payments be?

$741.57

$780.60

$821.69

$862.77

$905.91

QUESTION 13

Your subscription to Investing Wisely Weekly is about to expire. You plan to subscribe to the magazine for the rest of your life, and you can renew it by paying $85 annually, beginning immediately, or you can get a lifetime subscription for $850, also payable immediately. Assuming that you can earn 6.0% on your funds and that the annual renewal rate will remain constant, how many years must you live to make the lifetime subscription the better buy?

7.70

8.80

10.35

12.18

14.33

QUESTION 14

How much would $1, growing at 3.5% per year, be worth after 75 years?

$12.54

$13.20

$13.86

$14.55

$15.28

QUESTION 15

How much would $100, growing at 5% per year, be worth after 75 years?

$3,689.11

$3,883.27

$4,077.43

$4,281.30

$4,495.37

QUESTION 16

You want to buy a new ski boat 2 years from now, and you plan to save $8,200 per year, beginning one year from today. You will deposit your savings in an account that pays 6.2% interest. How much will you have just after you make the 2nd deposit, 2 years from now?

$15,260

$16,063

$16,908

$17,754

$18,642

QUESTION 17

Disregarding risk, if money has time value, it is impossible for the present value of a given sum to exceed its future value.

True

False

QUESTION 18

If the discount (or interest) rate is positive, the present value of an expected series of payments will always exceed the future value of the same series.

True

False

QUESTION 19

If a bank compounds savings accounts quarterly, the nominal rate will exceed the effective annual rate.

True

False

QUESTION 20

Due to a number of lawsuits related to toxic wastes, a major chemical manufacturer has recently experienced a market reevaluation. The firm has a bond issue outstanding with 15 years to maturity and a coupon rate of 8 percent, with interest paid semiannually. The required nominal rate on this debt has now risen to 16 percent. What is the current value of this bond?

$1,273

$1,000

$7,783

$550

QUESTION 21

For bonds, price sensitivity to a given change in interest rates is generally greater the longer before the bond matures.

True

False

QUESTION 22

A 25-year, $1,000 par value bond has an 8.5% annual coupon. The bond currently sells for $875. If the yield to maturity remains at its current rate, what will the price be 5 years from now?

$839.31

$860.83

$882.90

$904.97

$927.60

QUESTION 23

Moerdyk Corporation's bonds have a 10-year maturity, a 6.25% semiannual coupon, and a par value of $1,000. The going interest rate (rd) is 4.75%, based on semiannual compounding. What is the bond's price?

1,063.09

1,090.35

1,118.31

1,146.27

1,174.93

QUESTION 24

Wachowicz Corporation issued 15-year, noncallable, 7.5% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 14 years to maturity?

$1,077.01

$1,104.62

$1,132.95

$1,162.00

$1,191.79

QUESTION 25

Assume that you are considering the purchase of a 15-year bond with an annual coupon rate of 9.5%. The bond has face value of $1,000 and makes semiannual interest payments. If you require an 11.0% nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?

$891.00

$913.27

$936.10

$959.51

$983.49