Ordinary: Before the first payment is made

Annuity Due: Into the payment

Question 1
0 out of 1 points

Today is your 21st birthday, and you are opening up an investment
account. You plan to contribute $2,000 per year on your birthday. The first
contribution will be made today, and the 45th, and final, contribution will
be made on your 65th birthday. If you earn 10% a year on your
investments, how much money will you have in the account on your 65th
birthday, immediately after making your final contribution?
Answer

Selected Answer:
[None Given]
Correct Answer:
c.
$1,437,809.67
Future Value of Ordinary Annuity




Question 2
0 out of 1 points

Starting on her 23rd birthday, Janet plans to start saving for her retirement.
She will contribute $1,000 to a brokerage account each year on her
birthday, starting today. Her 42nd and final contribution will take place on
her 64th birthday. Janet's aunt gave her $10,000 today to get the account
started. If the account has an expected annual return of 10%, how much
will Janet expect to have in her account on her 65th birthday?
Answer

Selected Answer:
[None Given]
Correct Answer:
b.
$1,139,038



Question 3
0 out of 1 points

You have $2,000 invested in a bank account that pays a 4% nominal
interest rate with daily compounding. How much money will you have in
the account in 132 days? (Assume there are 365 days in each year.)
Answer

Selected
Answer:
[None Given]
Correct
Answer:
a.
$2,029.14
Future Value of Single Cash Flow (Normal Compounding
Interest






Ordinary: Before the first payment is made
Annuity Due: Into the payment
Question 4
0 out of 1 points

Your bank account pays an 8% nominal rate of interest. The interest is
compounded quarterly. Which of the following statements is CORRECT?
Answer

Selected
Answer:
[None Given]
Correct
Answer:
c.
The periodic rate of interest is 2% and the effective rate of
interest is greater than 8%.

Periodic Interest = Nominal/Periods
Effective Rate > Nominal Rate


Question 5
0 out of 1 points

Your father has $500,000 invested at 8%, and he now wants to retire. He
wants to withdraw $50,000 at the end of each year, beginning at the end of
this year. How many years will it take to exhaust his funds, i.e., run the
account down to zero?
Answer

Selected Answer:
[None Given]
Correct Answer:
e.
20.91 years


Question 6
0 out of 1 points

South Penn Trucking is financing a new truck with a loan of $10,000 to be
repaid in 5 annual end-of-year installments of $2,504.56. What annual
interest rate is the company paying?
Answer

Selected Answer:
[None Given]
Correct Answer:
a.
8%


Question 7
0 out of 1 points

Which of the following statements is NOT CORRECT, assuming positive
interest rates?
Answer

Selected
Answer:
[None Given]
Correct
Answer:
e.
An investment's nominal interest rate will always be equal to
or greater than its effective annual rate.


Question 8
Ordinary: Before the first payment is made
Annuity Due: Into the payment
0 out of 1 points

You have been offered a 7-year investment at a price of $50,000. It will
pay $5,000 at the end of Year 1, $10,000 at the end of Year 2, and $15,000
at the end of Year 3, plus a fixed but currently unspecified cash flow, X, at
the end of Years 4 through 7. The payer is essentially riskless, so you are
sure the payments will be made, and you regard 9% as an appropriate rate
of return on riskless 7-year investments. What cash flow must the
investment provide at the end of each of the final 4 years, that is, what is
X?
Answer

Selected Answer:
[None Given]
Correct Answer:
b.
$10,158.58


Question 9
0 out of 1 points

A $10,000 loan is to be amortized over 5 years, with annual end-of-year
payments. Given these facts, which of these statements is CORRECT?
Answer

Selected
Answer:
[None Given]
Correct
Answer:
c.
The proportion of each payment that represents interest as
opposed to repayment of principal would be higher if the
interest rate were higher.


Question 10
0 out of 1 points

Which of the following statements regarding a 30-year (360-month)
$100,000 fixed-rate mortgage is CORRECT? (Ignore all taxes and
transactions costs.)
Answer

Selected
Answer:
[None Given]
Correct
Answer:
e.
The proportion of the monthly payment that goes towards
repayment of principal will be higher 10 years from now than
it will be this year.


Question 1
0 out of 1 points

A 30-year, $115,000 mortgage has a nominal annual rate of 7%. All
payments are made at the end of each month. What is the monthly payment
on the mortgage?
Answer

Selected Answer:
[None Given]

Ordinary: Before the first payment is made
Annuity Due: Into the payment
Correct Answer:
d.
$765.10

Question 2
0 out of 1 points

Sims Inc. earned $1.00 per share in 2000. Five years later, in 2005, it
earned $2.00. What was the growth rate in Sims' earnings per share (EPS)
over the 5-year period?
Answer

Selected Answer:
[None Given]
Correct Answer:
c.
14.87%


Question 3
0 out of 1 points

Your father has $500,000 invested at 8%, and he now wants to retire. He
wants to withdraw $50,000 at the end of each year, beginning at the end of
this year. How many years will it take to exhaust his funds, i.e., run the
account down to zero?
Answer

Selected Answer:
[None Given]
Correct Answer:
c.
20.91 years


Question 4
0 out of 1 points

You want to go to grad school 3 years from now, and you can save $5,000
per year, beginning immediately. You plan to deposit the funds in a mutual
fund which you expect to return 9% per year. Under these conditions, how
much will you have just after you make the 3rd deposit, 3 years from now?
Answer

Selected Answer:
[None Given]
Correct Answer:
a.
$17,865.65


Question 5
0 out of 1 points

Which of the following statements regarding a 30-year (360-month)
$100,000 fixed-rate mortgage is CORRECT? (Ignore all taxes and
transactions costs.)
Answer

Selected
Answer:
[None Given]
Correct
Answer:
a.
The proportion of the monthly payment that goes towards

Ordinary: Before the first payment is made
Annuity Due: Into the payment
repayment of principal will be higher 10 years from now than
it will be this year.

Question 6
0 out of 1 points

Which of the following statements regarding a 30-year, $100,000 mortgage
with a nominal interest rate of 10%, compounded monthly, is NOT
CORRECT?
Answer

Selected Answer:
[None Given]
Correct Answer:
d.
The monthly payments will decline over time.


Question 7
0 out of 1 points

You are interested in investing your money in a bank account. Which of the
following banks provides you with the highest effective rate of interest?
Answer

Selected Answer:
[None Given]
Correct Answer:
c.
Bank 4; 8.0% with daily (365-day) compounding.


Question 8
0 out of 1 points

Suppose you deposited $5,000 in a bank account that pays 6% with daily
compounding and a 360-day year. How much could you withdraw after 7
months, assuming each month has 30 days?
Answer

Selected Answer:
[None Given]
Correct Answer:
d.
$5,178.08


Question 9
0 out of 1 points

Assume that you will receive $2,000 a year in Years 1 through 5, $3,000 a
year in Years 6 through 8, and $4,000 in Year 9, with all cash flows to be
received at the end of the year. If you require a 14% rate of return, what is
the present value of these cash flows?
Answer

Selected Answer:
[None Given]
Correct Answer:
b.
$11,714


Question 10
0 out of 1 points
Ordinary: Before the first payment is made
Annuity Due: Into the payment

What's the future value of $2,000 after 3 years if the appropriate interest
rate is 8%, compounded monthly?
Answer

Selected Answer:
[None Given]
Correct Answer:
a.
$2,540.47



Question 1
0 out of 1 points

Your father has $500,000 invested at 8%, and he now wants to retire. He
wants to withdraw $50,000 at the end of each year, beginning at the end of
this year. How many years will it take to exhaust his funds, i.e., run the
account down to zero?
Answer

Selected Answer:
[None Given]
Correct Answer:
a.
20.91 years


Question 2
0 out of 1 points

What is the future value of a 5-year ordinary annuity with annual payments
of $200, evaluated at 15%?
Answer

Selected Answer:
[None Given]
Correct Answer:
e.
$1,348.48


Question 3
0 out of 1 points

How long would it take $100 to double if it were invested in a bank that
pays 5% per year?
Answer

Selected Answer:
[None Given]
Correct Answer:
d.
14.21 years


Question 4
0 out of 1 points

A 30-year, $115,000 mortgage has a nominal annual rate of 7%. All
payments are made at the end of each month. What is the monthly payment
on the mortgage?
Answer

Selected Answer:
[None Given]

Ordinary: Before the first payment is made
Annuity Due: Into the payment
Correct Answer:
c.
$765.10

Question 5
0 out of 1 points

A $10,000 loan is to be amortized over 5 years, with annual end-of-year
payments. Given these facts, which of these statements is CORRECT?
Answer

Selected
Answer:
[None Given]
Correct
Answer:
b.
The proportion of each payment that represents interest as
opposed to repayment of principal would be higher if the
interest rate were higher.


Question 6
0 out of 1 points

Which of the following statements regarding a 30-year, $100,000 mortgage
with a nominal interest rate of 10%, compounded monthly, is NOT
CORRECT?
Answer

Selected Answer:
[None Given]
Correct Answer:
d.
The monthly payments will decline over time.


Question 7
0 out of 1 points

Elizabeth has $35,000 in an investment account, but she wants the account
to grow to $100,000 in 10 years without making any additional
contributions to the account. What effective annual rate of interest does she
need to earn on the account to meet her goal?
Answer

Selected Answer:
[None Given]
Correct Answer:
b.
11.07%


Question 8
0 out of 1 points

You recently received a no annual fee credit card offer that states that the
annual percentage rate (APR) is 18% on outstanding balances.
What is the effective annual interest rate? (Hint: Remember these
companies bill you monthly.)
Answer

Selected Answer:
[None Given]
Correct Answer:
e.

Ordinary: Before the first payment is made
Annuity Due: Into the payment
19.56%

Question 9
0 out of 1 points

If a bank pays a 6% nominal rate, with monthly compounding, on deposits,
what effective annual rate does the bank pay?
Answer

Selected Answer:
[None Given]
Correct Answer:
c.
6.17%


Question 10
0 out of 1 points

Which of the following bank accounts has the highest effective annual
return?
Answer

Selected
Answer:
[None Given]
Correct
Answer:
a.
An account that pays 10% nominal interest with daily
compounding.