Question 1(5 points)

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Which one of the following terms is used to identify a British perpetuity?Could also say was, since they have not existed for about 150 years.

Question 1 options:

ordinary annuity

consol

discounted loan

annuity due

amortized cash flow

Question 2(5 points)

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The time value of money concept can be defined as

Question 2 options:

the relationship between the supply and demand of money.

the relationship between money spent versus money received.

the relationship between a dollar to be received in the future and a dollar today.

the relationship of interest rate stated and amount paid.

None of the above.

Question 3(5 points)

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A $250,000 loan is to be amortized over 8 years, with annual end-of-year payments. Which of these statements is CORRECT?

Question 3 options:

The proportion of interest versus principal repayment would be the same for each of the 8 payments.

The annual payments would be larger if the interest rate were lower.

If the loan were amortized over 10 years rather than 8 years, and if the interest rate were the same in either case, the first payment would include more dollars of interest under the 8-year amortization plan.

The proportion of each payment that represents interest as opposed to repayment of principal would be lower if the interest rate were lower.

Question 4(5 points)

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A U.S. Treasury bond will pay a lump sum of $1,000 exactly 3 years from today. The nominal interest rate is 6%, semiannual compounding. Which of the following statements is CORRECT?

Question 4 options:

The PV of the $1,000 lump sum has a higher present value than the PV of a 3-year, $333.33 ordinary annuity.

The periodic interest rate is greater than 3%.

The periodic rate is less than 3%.

The present value of the $1,000 would be smaller if interest were compounded monthly rather than semiannually.

Question 5(10 points)

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How much would Roderick have after 6 years if he has $500 now and leaves it invested at 5.5% with annual compounding?

Question 5 options:

$591.09

$622.20

$654.95

$689.42

Question 6(10 points)

What is the future value of a 7-year annuity due with annual payments of $ 599 , evaluated at a 17.25 percent interest rate? Enter your answer to the nearest $.01. Do not use $ or , signs in your answer. Enter your answer as a positive number.Your Answer:

Question 6 options:

Answer

Question 7(20 points)

You are presented with an investment opportunity that will give you the following stream of cash flows: nothing for the next 4 years; at the following year, an amount of $5,000 per year until year 11; and then an amount of $8,000 per year until year 23. If your required rate of return (APR) is 8% compounded annually, what is the present value today of these cash flows?

Do not use the $ sign. Use commas to separate thousands. Use to decimals. Round to the nearest dollar. For example if you obtain $1,432.728 then enter1,433;if you obtain $432.00 then enter432

Your Answer:

Question 7 options:

Answer

Question 8(10 points)

What is the present value of $1,100 per year, at a discount rate of 10 percent if the first payment is received 6 years from now and the last payment is received 30 years from now?

Question 8 options:

$6,333.33

$6,420.12

$6,199.74

$6,511.08

$6,238.87

Question 9(10 points)

You have just taken out a 22 -year, $ 248 ,000 mortgage loan at an annual interest rate of 4.0 percent. The mortgage has monthly payments. What is the amount of each payment? Calculate your answer to the nearest $.01. Enter your answer as a postive number. Do not use the $ or , sign.Your Answer:

Question 9 options:

Answer

Question 10(10 points)

An S&L provides a loan with 15 yearly repayments of $8,000 with the first payment beginning immediately. Which of the following amounts comes closest to the present value of the loan if the interest rate is 7%?

Question 10 options:

$ 72,863

$ 77,964

$115,648

$120,000

Not enough information is given to determine the answer.

Question 11(10 points)

Jerry and Faith Hudson recently obtained a 30-year (360-month), $250,000 mortgage with a 9 percent nominal interest rate. What will be the remaining balance on the mortgage after five years (60 months)?

Question 11 options:

$237,056

$239,700

$249,307

$212,386

$239,024