Question 5

In finance time value of money problems, a finite series of equal payments over equal periods is referred to as

a perpetuity cash flow problem

a growing annuity cash flow problem

an equilibrium cash flow problem

an annuity cash flow problem

none of the other alternativesare accurate

an equal-equal cash flow problem

Question 6

A bank is paying 7.5% APR on a CD. (Note: The convention when there are no periodic payments is to assume annual compounding, unless stated otherwise. Thus this is annual compounding.) If you put $2,643 into an account, how much will the account be worth in 5 years?Answer to 2 decimal places.

Question 7

What is the PV of $779per year for 5 years if the required return is 8.5% (assume the $779 payments come at the end of each of the next 5 years)?Answer to 2decimal places.

Question 8

You have just taken out a 30year mortgage on your new home for $131,702. This mortgage is to be repaid in 360 equal monthly installments. If the stated (nominal) annual interest rate is 13.68percent, what is the amount of each of the monthly installments? (Note: The convention when periodic payments are involved is to assume that the compounding frequency is the same as the payment frequency, unless stated otherwise. Thus this implies13.68% APR, compounded monthly for this problem.To compute the correct payment,do not round your interest rate too much.)

Question 9

Bank A charges 12.1% APR on auto loans with monthly compounding. What is the Effective Annual Rate (EAR) ? (In other words, what is the EAR for a 12.1% APR with monthly compounding?)Answer in %form, with 3 decimals.For example, answer as 17.356 (not 0.17356).

Question 10

Next year you will begin receiving $207dollars per year in perpetuity from your grandparent's family trust fund (first payment is exactly 1 year from today).What is the present value today of these future cash flows if you discount them at 7%? (Hint: draw a time line to illustrate exactly the cash flows for this problem.)Answer to 2 decimal points.