Question 1

You are borrowing money today at an 8% interest rate. You will repay the principal plus all the interest in one lump sum of $6500 four years from today. How much are you borrowing?

a)$4777.69

b)$1625.00

c)$5204.16

d)$5572.70

e)$6018.52

Question 2

You are scheduled to receive $30,000 in two years. When you receive it, you will invest it for six more years at 6.5% per year. How much will you have in eight years from now?

Question 3

One year ago you invested $3000. Today it is worth $3142.50. What rate of interest did you earn?

a)4.63%

b)4.68%

c)4.70%

d)4.73%

e)4.75%

Question 4

You expect to receive $10,000 at graduation in two years. You plan on investing it at 10% until you have $120,000. How long will it take you to have this amount from now?

Question 5

If the appropriate discount rate for the following cash flows is 9.75 percent per year, what is the present value of the cash flows?What is the value in year 3?

Question 6

An annuity:

a)is a debt instrument that pays no interest

b)is a stream of payments that vary with current market interest rates

c)is a level stream of equal payments through time

d)has no value

e)none of the above

Question 7

What happens to the future value of annuity if you increase the rate r? What happens to the present value?

Question 8

An investment offers $3,600 per year for 10 years.If the required return is 10%, what is the value of the investment today?

Question 9

You are to make monthly deposits of $150 into a retirement account that pays 11 percent interest rate compounded monthly. If your first deposit will be made one month from now, how large will your retirement account be in 20 years?

Question 10

Dinero Bank offers you a $40,000, seven year term loan at 9% annual interest rate. What will your annual loan payment be?

Question 11

First National Bank charges 12.2 percent compounded monthly on its business loans. First United Bank charges 12.4 percent compounded semi-annually. As a potential borrower, which bank would you go for a new loan?