Question 1 ALL OTHER THINGS REMAINING THE SAME, THE ______ THE NUMBER OF PAYMENTS THE _______ THE PRESENT VALUE OF AN ANNUITY WILL BE.

I. HIGHER; HIGHER

II. HIGHER; LOWER

III. LOWER; LOWER

IV. LOWER; HIGHER

A. I AND III B. II ONLY C. IV ONLY D. II AND IV

Question 2 ALL OTHER THINGS REMAINING THE SAME, THE _______ THE NUMBER OF PAYMENTS, THE ________ THE FUTURE VALUE OF AN ANNUITY WILL BE.

I. HIGHER; HIGHER

II. HIGHER; LOWER

III. LOWER; LOWER

IV. LOWER; HIGHER

A. IV ONLY B. II AND IV C. I AND III D. II ONLY.

Question 3 SUPPOSE TODAY IS YOUR 25TH BIRTHDAY AND YOU PLAN TO RETIRE ON YOUR 65TH BIRTHDAY. USING AN EXPECTED RETURN OF 10% PER YEAR, FIND THE FUTURE VALUE (AT AGE 65) OF A $200 MONTHLY ANNUITY STARTING ONE MONTH AFTER YOUR 25TH BIRTHDAY. ALSO, FIND THE FUTURE VALUE OF THE SAME ANNUITY STARTING ONE MONTH AFTER YOUR 35TH BIRTHDAY (10 YEARS LATER). HOW MUCH MORE WILL YOU HAVE WHEN YOU RETIRE IF YOU START SAVING ONE MONTH FROM NOW COMPARED TO STARTING 10 YEARS LATER?

A. $614,028.18 B. $802,829.16 C. $812,718.33 D. $798,105.29

Question 4 SUPPOSE TODAY IS YOUR 25TH BIRTHDAY AND YOU PLAN TO SAVE $200 PER MONTH, STARTING NEXT MONTH, UNTIL YOU ARE 65 YEARS OLD. YOUR FINANCIAL ADVISOR TELLS YOU PORTFOLIO A HAS AN EXPECTED ANNUAL RETURN OF 12%. HE ALSO TELLS YOU PORTFOLIO B IS SLIGHTLY LESS RISKY BUT HAS AN EXPECTED RETURN OF JUST 10%. HOW MUCH MORE WILL YOU HAVE AT AGE 65 IF YOU INVEST IN PORTFOLIO A RATHER THAN IN PORTFOLIO B?

A. $1,308,105.28 B. $502,380.92 C. $308,207.17 D. $1,088,138.59

Question 5 THE PRESENT VALUE OF A PERPETUITY IS $5,000. IF THE CONSTANT ANNUAL PAYMENT IS $650, THE DISCOUNT RATE USED TO FIND THE PRESENT VALUE MUST BE _______. A. 14% B. 13% C. 12% D. 15%

Question 6 IF YOU CAN EARN 8% PER YEAR ON YOUR INVESTMENTS, HOW LONG WILL IT TAKE TO TRIPLE YOUR MONEY?

A. 12.4 YEARS B. 15.8 YEARS C. 13.7 YEARS D. 14.3 YEARS

Question 7 BANK A PAYS 2% COMPOUNDED MONTHLY AND BANK B PAYS 1.97% COMPOUNDED CONTINUOUSLY. BOTH BANKS ARE FDIC INSURED. ASSUMING YOU ARE RATIONAL, WHERE WOULD YOU DEPOSIT YOUR MONEY? A. BANK A BECAUSE ITS EAR IS 2.058% WHICH IS HIGHER THAN BANK B'S EAR B. BANK B BECAUSE ITS EAR IS 2.0597% WHICH IS HIGHER THAN BANK A'S EARC C. BANK B BECAUSE ITS EAR IS 2.029% WHICH IS HIGHER THAN BANK A'S EAR D. BANK A BECAUSE ITS EAR IS 2.018% WHICH IS HIGHER THAN BANK B'S EAR.

Question 8 STARTING NEXT YEAR YOU WILL NEED $20,000 ANNUALLY FOR 4 YEARS TO COMPLETE YOUR EDUCATION. (ONE YEAR FROM TODAY YOU WILL WITHDRAW THE FIRST $20,000). YOUR PARENTS DEPOSIT AN AMOUNT TODAY IN A BANK PAYING 2% ANNUAL INTEREST, WHICH WILL PROVIDE THE NEEDED $20,000 PAYMENTS. HOW MUCH MUST THE DEPOSIT BE? A. $76,154.57 B. $79,903.25 C.$78,904.48 D.$80,000

Question 9 ITS FINALLY TIME TO BUY YOUR DREAM HOUSE ON THE SHORES OF BEAUTIFUL LAKE WEDOWEE. YOUR HOUSE WILL COST $1,500,000. YOUR BANKER HAS AGREED TO LEND YOU 80% OF THIS AMOUNT USING A 30-YEAR FIXED-RATE MORTGAGE HAVING MONTHLY PAYMENTS AND AN ANNUAL INTEREST RATE OF 6% (LOANS OF THIS SIZE ARE CALLED JUMBO LOANS AND HAVE HIGHER RATES). THE MONTHLY PAYMENT ON THIS LOAN WILL BE ________. A. $7,194.61 B.$5,992.48 C.$6,502.44 D.$9,201.57

Question 10 ITS FINALLY TIME TO BUY YOUR DREAM HOUSE ON THE SHORES OF BEAUTIFUL LAKE WEDOWEE. YOUR HOUSE WILL COST $1,500,000. YOUR BANKER HAS AGREED TO LEND YOU 80% OF THIS AMOUNT USING A 30-YEAR FIXED-RATE MORTGAGE HAVING MONTHLY PAYMENTS AND AN ANNUAL INTEREST RATE OF 6% (LOANS OF THIS SIZE ARE CALLED JUMBO LOANS AND HAVE HIGHER RATES). THE BALANCE REMAINING ON THE LOAN AFTER THE 200TH PAYMENT IS ________, THE AMOUNT OF THE 200TH PAYMENT APPLIED TO PRINCIPAL IS _______ AND THE AMOUNT APPLIED TO INTEREST IS _______. A. $791,082.17; $3,223.08; $3,971.53 B.$852,584.29; $3,219.20; $3,602.52 C.$929,420.28; $3,601.28; $3,003.33 D.$728,193.35; $3,108.48; $3,915.24

Question 11 ITS FINALLY TIME TO BUY YOUR DREAM HOUSE ON THE SHORES OF BEAUTIFUL LAKE WEDOWEE. YOUR HOUSE WILL COST $1,500,000. YOUR BANKER HAS AGREED TO LEND YOU 80% OF THIS AMOUNT USING A 30-YEAR FIXED-RATE MORTGAGE HAVING MONTHLY PAYMENTS AND AN ANNUAL INTEREST RATE OF 6% (LOANS OF THIS SIZE ARE CALLED JUMBO LOANS AND HAVE HIGHER RATES). THE TOTAL INTEREST PAID OVER THE LIFE OF THIS LOAN IS _______ WHICH IS ______ THAN THE AMOUNT OF THE ORIGINAL LOAN. A. $1,440,201.47; LESS B.$1,390,058.27; MORE C.$1,103,028.99; LESS D.$992,085.82; LESS

Question 12 SUPPOSE YOU PAY ME $1,000,000 NOW. IN RETURN, I PAY YOU $7,500 PER MONTH FOR THE NEXT 30 YEARS. YOUR ANNUAL RETURN ON THIS INVESTMENT WOULD BE _______. A. 7.25% B.7.50% C. 6.95% D. 8.23%

Question 13 AN INVESTMENT WILL PAY $500 AT THE END OF EACH OF THE NEXT 10 YEARS AND $1,000 AT THE END OF EACH OF YEARS 11 THROUGH 20. THE PRESENT VALUE OF THIS CASH FLOW STREAM IS _______ WHEN THE DISCOUNT RATE IS 10%.

A. $5,441.28 B. $5,880.38 C. $7,150.24 D. $6,802.19