Question 1 Cloe borrows $4, one. mm from a building society for 3 years at an annual rate of interest of 5% and she is going to pay it all back in a lump sum at the end ofyear 3. She will malte no repayments before the end oftfte loan. How much she will have to pay back at the end of three years if the annual interest rate is compounded continuously? . $?83.859.45 E. $4.?BS.369.45 C. $4.T64.4- D. $?4.064 E. None of the above is necessarily true. Question 2 I want to invest? dollars and two banks are willing to acceptP for 1' years. Bank 1 offers me an annual rate of interesti [compounded annuallyI that isI I: = 1] and Bank 2 offers me an annual rate of interest 5 compounded continuously. A nancial adyisor told me that I might feel certain that there exists a relationship between :3 and a at which it does not matter if I put my money in Bani: 1 or Bank 2. Which of the following options is true? The relationship is In 1 + 1115 =i The relationship is E = i . . . r' k The relatlonshlp Is a = [1 + E) 1 The relationship is a =]n|f1 + i) Not enough information is supplied to provide an answer [\"95" F?\" Question 3 What is the approximate number of years t for the principal to double when the annual interest r is compounded continuously? {1.63 AI 3 Question 4 Suppose that you can invest $20,000 in a business that guarantees you only the cash flows at the end of years 2, 3, and 5 as indicated in Table 1. Assume an interest rate of T% compounded annually. Year Cash FlowiS] 2 10,000 3 8.000 5 6.000 Table 1 Which of the following options is true? A. The investmentwill be undertaken because the total cash ow for the three years is greater than your initial investment. B. It would be better to invest the $20,000 in a bank paying Hi1. C. The mathematical calculation of future profits today recommends the investment project should be undertaken. D. The internal rate of return of this investment project is T%, and therefore, the Net Present Value is zero. E. Not enough information is supplied to provide an answer. Question 5 Suppose that we are thinking of buying a machine that yields a rental of 541001] each year for 3 years and then can be sold for scrap value of 510.001]. With an interest rate of 10 percent, how much would we be willing to pay? . 522.000 . 518.460 . 518.000 . 511450 . 59,960 manual: Question 6 The market forces in nancial markets are determining that all asset yields {interest rates] are equal to 5% a year. A government bond issued today pays 2310.000 a year for each ofthe next three years, and therefore. the price of the bond today is approximately $27, 23 2. 5 0. Suppose that you are the governor of the Reserve Bank of nsttaa and you want to reduce the interest rate to 2% implementing yield. curve control policy. What would you do? A. Buy any quantity of bonds atthe prevailing price. B. BuyI 50% ofme stock of bonds. C. Increase the supply of 3-year government bonds to reduce the price of the bonds. D. Buy any quantity of bonds at $23, 838. 33 per bond. E. Sell any quantity of bonds at $2 8, 338. 33 per bond. Question T ex Find the equation ofthe tangent line to the curve C originated by y = f(x] = I for x = 1. A. y1=(x1) B. y=1 C. ye=e(z'l] D. y=e E. y=|] QuestionB Consider the function dened by the formula 100 _ zf