Question

Determine how much $1,000 deposited in a savings account paying 8% (compounded annually) will be worth after 5 years.

Excel hint: FV(rate, nper, pmt = 0, pv, fv, type) = ??

answer 1.469

Answer 1

Question 12.5 / 2.5 pts

_____ is interest that is paid not only on the principal, but also on any interest earned but not withdrawn during earlier periods.

  

compound interest

 

  

basic interest

 

  

future interest

 

  

simple interest

 

 

Question 22.5 / 2.5 pts

Finding the discounted current value of $1,000 to be received at the end of each of the next 5 years requires calculating the

  

present value of an annuity due

 

  

future value of an annuity due

 

  

present value of an annuity

 

  

future value of an annuity

 

 

Question 32.5 / 2.5 pts

An annuity due is one in which

  

payments or receipts occur forever.

 

  

payments or receipts occur at the beginning of each period.

 

  

payments or receipts occur at the end of each period.

 

  

cash flows occur continuously.

 

 

Question 42.5 / 2.5 pts

If the present value of a given sum is equal to its future value, then

  

the discount rate must be low

 

  

none of the answers is correct

 

  

the discount rate must be zero

 

  

the discount rate must be very high

 

 

Question 52.5 / 2.5 pts

The more frequent the compounding the

  

lesser the future value

 

  

greater the effective interest rate

 

  

greater the amount deposited

 

  

greater the present value

 

 

Question 62.5 / 2.5 pts

Determine how much $1,000 deposited in a savings account paying 8% (compounded annually) will be worth after 5 years.

Excel hint: FV(rate, nper, pmt = 0, pv, fv, type) = ??

  

$784

 

  

$1,400

 

  

$1,469

 

  

$5,526

 

 

The next two questions will be based on the following information.

Mr. Moore is 35 years old today and is beginning to plan for his retirement. He wants to set aside an equal amount at the end of each of the next 25 years so that he can retire at age 60. He expects to live to the maximum age of 80 and wants to be able to withdraw $25,000 per year from the account on his 61st through 80th birthdays. The account is expected to earn 10 percent per annum for the entire period of time.

 

Question 72.5 / 2.5 pts

Determine the value of pension at the age of 60 for all payments during age 61 - 80?

Excel hint: PV(rate, nper, pmt, fv = 0, type = 0) = ??

  

112,839.09

 

  

312,839.09

 

  

500,000.00

 

  

212,839.09

 

 

Question 82.5 / 2.5 pts

 Determine the size of the annual deposits that must be made by Mr. Moore from age 35 till 60 to achieve the future value of pension (at age 60.)

Excel hint: Pmt(rate, nper, pv, fv, type = 0) = ??

  

$23,449

 

  

$2,164

 

  

$212,850

 

  

$8,514

 

 

Question 92.5 / 2.5 pts

You sold 100 shares of stock today for $30 per share that you paid $20 for 6 years ago. Determine the average annual rate of return on your investment, assuming the stock paid no dividends.

 

Excel hint: Rate(nper, pmt =0, pv, fv, type = 0, guess = 0.05) = ??

  

25%

 

  

150%

 

  

7%

 

  

8.33%

 

 

Question 102.5 / 2.5 pts

The Florida lottery agrees to pay the winner $250,000 at the end of each year for the next 20 years. What is the future value of this lottery if you plan to put each payment in an account earning 9 percent?

  

$12.79 million

 

  

$2.28 million

 

  

$5.00 million

 

  

$14.32 million

 

 

Question 112.5 / 2.5 pts

Many IRA fund managers argue that investors should invest at the beginning of the year rather than at the end. What is the difference to an investor who invests $2,000 per year at 11 percent over a 30 year period?

Excel hint:

Type = 0; ordinary annuity

Type = 1: annuity due

  

$54,244

 

  

There is no difference

 

  

$36,189

 

  

$43,785

 

 

Question 122.5 / 2.5 pts

New Jersey Mutual has offered you a single premium annuity that will pay you $12,000 per year (end of year) for the next 15 years. If you must pay $109,296 today for this annuity, what is your expected rate of return?

  

8%

 

  

7%

 

  

10%

 

  

9%

 

 

Question 132.5 / 2.5 pts

Designs Now is opening a showcase office to display and sell its computer designed poster art. Designs expects cash flows to be $120,000 in the first year, $180,000 in the second year, $240,000 in the third year. If Designs uses 11 percent as its discount rate, what is the present value of the cash flows?

  

$429,686

 

  

$457,620

 

  

$424,820

 

  

$456,758

 

 

IncorrectQuestion 140 / 2.5 pts

What is the present value of $1,000 received 2 years from today if the nominal interest rate is 9% (annual percentage rate) and compounded monthly?

 

Excel hint:

1) PV(rate, nper, pmt = 0, fv, type = 0)

2) Difference between APR and periodic discount rate

 

  

$836

 

  

$833

 

  

$914

 

  

$842

 

 

Question 152.5 / 2.5 pts

Which of the following statements is/are correct?

I. At 6% interest, the present value of: $400 for the first year, $600 for the second year, and $800 for the third year is $1,603.00.

II. The future value of the following mixed cash flow stream (if it is from an annuity due at 6% interest):$400 for the first year, $600 for the second year, and $800 for the third year is $1,999 (rounded).

  

Neither statement I nor II is correct.

 

  

Only statement I is correct.

 

  

Both statements I and II are correct.

 

  

Only statement II is correct.

 

 

Question 162.5 / 2.5 pts

Jenny Genius wants to purchase a new car. She knows that she can afford to pay $250 per month and that her bank will charge her 8% interest on the car loan. She intends to pay off the car in five years. Interest will be compounded monthly. Of the following, which is the most expensive vehicle in her price range that she could consider?

  

A Malibu selling for $12,320

 

  

A Celica selling for $17,500

 

  

A Civic selling for $14,670

 

  

A Taurus selling for $11,900

 

 

Amortized loan: The next three questions will be based on the following information. 

Prepare an amortization schedule for a three-year loan of $100,000. The interest rate is 8% per year, and the loan calls for equal annual payment.

• How much is the annual total loan payment?

• How much interest is paid in the first year?

• How much total interest is paid over the life of the loan? 

Excel hint:

 

 

Question 172.5 / 2.5 pts

For the above loan, how much interest is paid in the first year?

  

7500

 

  

8000

 

  

10000

 

  

9000

 

 

Question 182.5 / 2.5 pts

For the above loan, how much is the annual payment?

  

38803

 

  

33333

 

  

39803

 

  

48903

 

 

Question 192.5 / 2.5 pts

For the above loan, how much is the total interest paid over three years?

  

16410

 

  

16900

 

  

26410

 

  

26941

 

 

Question 202.5 / 2.5 pts

The yield-to-maturity of a bond with a finite maturity date is a function of all of the following variables except:

  

the current price

 

  

the required rate of return on the bond

 

  

the uniform annual interest payments

 

  

the maturity value

 

 

Question 212.5 / 2.5 pts

Which of the following statements concerning preferred stocks is true?

  

Preferred stock dividends per share are normally increased as the earnings of the firm increase.

 

  

Preferred dividends per share are usually not cut or suspended unless the firm is faced with serious financial problems.

 

  

The par value of a stock is always the same as the initial selling price.

 

  

Preferred stockholders have a prior claim on the income and assets of the firm as compared to the claims of lenders.

 

 

Question 222.5 / 2.5 pts

Potential sellers of an asset can be represented as a ___ schedule showing the ___ prices at which they are willing to sell given quantities of the asset.

  

supply, minimum

 

  

supply, average

 

  

supply, maximum

 

  

demand, maximum

 

 

Question 232.5 / 2.5 pts

When the required rate of return is ____ the coupon rate, the bond will sell at a discount.

  

equal to

 

  

the same as

 

  

less than

 

  

Question 12.5 / 2.5 pts

_____ is interest that is paid not only on the principal, but also on any interest earned but not withdrawn during earlier periods.

  

compound interest

 

  

basic interest

 

  

future interest

 

  

simple interest

 

 

Question 22.5 / 2.5 pts

Finding the discounted current value of $1,000 to be received at the end of each of the next 5 years requires calculating the

  

present value of an annuity due

 

  

future value of an annuity due

 

  

present value of an annuity

 

  

future value of an annuity

 

 

Question 32.5 / 2.5 pts

An annuity due is one in which

  

payments or receipts occur forever.

 

  

payments or receipts occur at the beginning of each period.

 

  

payments or receipts occur at the end of each period.

 

  

cash flows occur continuously.

 

 

Question 42.5 / 2.5 pts

If the present value of a given sum is equal to its future value, then

  

the discount rate must be low

 

  

none of the answers is correct

 

  

the discount rate must be zero

 

  

the discount rate must be very high

 

 

Question 52.5 / 2.5 pts

The more frequent the compounding the

  

lesser the future value

 

  

greater the effective interest rate

 

  

greater the amount deposited

 

  

greater the present value

 

 

Question 62.5 / 2.5 pts

Determine how much $1,000 deposited in a savings account paying 8% (compounded annually) will be worth after 5 years.

Excel hint: FV(rate, nper, pmt = 0, pv, fv, type) = ??

  

$784

 

  

$1,400

 

  

$1,469

 

  

$5,526

 

 

The next two questions will be based on the following information.

Mr. Moore is 35 years old today and is beginning to plan for his retirement. He wants to set aside an equal amount at the end of each of the next 25 years so that he can retire at age 60. He expects to live to the maximum age of 80 and wants to be able to withdraw $25,000 per year from the account on his 61st through 80th birthdays. The account is expected to earn 10 percent per annum for the entire period of time.

 

Question 72.5 / 2.5 pts

Determine the value of pension at the age of 60 for all payments during age 61 - 80?

Excel hint: PV(rate, nper, pmt, fv = 0, type = 0) = ??

  

112,839.09

 

  

312,839.09

 

  

500,000.00

 

  

212,839.09

 

 

Question 82.5 / 2.5 pts

 Determine the size of the annual deposits that must be made by Mr. Moore from age 35 till 60 to achieve the future value of pension (at age 60.)

Excel hint: Pmt(rate, nper, pv, fv, type = 0) = ??

  

$23,449

 

  

$2,164

 

  

$212,850

 

  

$8,514

 

 

Question 92.5 / 2.5 pts

You sold 100 shares of stock today for $30 per share that you paid $20 for 6 years ago. Determine the average annual rate of return on your investment, assuming the stock paid no dividends.

 

Excel hint: Rate(nper, pmt =0, pv, fv, type = 0, guess = 0.05) = ??

  

25%

 

  

150%

 

  

7%

 

  

8.33%

 

 

Question 102.5 / 2.5 pts

The Florida lottery agrees to pay the winner $250,000 at the end of each year for the next 20 years. What is the future value of this lottery if you plan to put each payment in an account earning 9 percent?

  

$12.79 million

 

  

$2.28 million

 

  

$5.00 million

 

  

$14.32 million

 

 

Question 112.5 / 2.5 pts

Many IRA fund managers argue that investors should invest at the beginning of the year rather than at the end. What is the difference to an investor who invests $2,000 per year at 11 percent over a 30 year period?

Excel hint:

Type = 0; ordinary annuity

Type = 1: annuity due

  

$54,244

 

  

There is no difference

 

  

$36,189

 

  

$43,785

 

 

Question 122.5 / 2.5 pts

New Jersey Mutual has offered you a single premium annuity that will pay you $12,000 per year (end of year) for the next 15 years. If you must pay $109,296 today for this annuity, what is your expected rate of return?

  

8%

 

  

7%

 

  

10%

 

  

9%

 

 

Question 132.5 / 2.5 pts

Designs Now is opening a showcase office to display and sell its computer designed poster art. Designs expects cash flows to be $120,000 in the first year, $180,000 in the second year, $240,000 in the third year. If Designs uses 11 percent as its discount rate, what is the present value of the cash flows?

  

$429,686

 

  

$457,620

 

  

$424,820

 

  

$456,758

 

 

IncorrectQuestion 140 / 2.5 pts

What is the present value of $1,000 received 2 years from today if the nominal interest rate is 9% (annual percentage rate) and compounded monthly?

 

Excel hint:

1) PV(rate, nper, pmt = 0, fv, type = 0)

2) Difference between APR and periodic discount rate

 

  

$836

 

  

$833

 

  

$914

 

  

$842

 

 

Question 152.5 / 2.5 pts

Which of the following statements is/are correct?

I. At 6% interest, the present value of: $400 for the first year, $600 for the second year, and $800 for the third year is $1,603.00.

II. The future value of the following mixed cash flow stream (if it is from an annuity due at 6% interest):$400 for the first year, $600 for the second year, and $800 for the third year is $1,999 (rounded).

  

Neither statement I nor II is correct.

 

  

Only statement I is correct.

 

  

Both statements I and II are correct.

 

  

Only statement II is correct.

 

 

Question 162.5 / 2.5 pts

Jenny Genius wants to purchase a new car. She knows that she can afford to pay $250 per month and that her bank will charge her 8% interest on the car loan. She intends to pay off the car in five years. Interest will be compounded monthly. Of the following, which is the most expensive vehicle in her price range that she could consider?

  

A Malibu selling for $12,320

 

  

A Celica selling for $17,500

 

  

A Civic selling for $14,670

 

  

A Taurus selling for $11,900

 

 

Amortized loan: The next three questions will be based on the following information. 

Prepare an amortization schedule for a three-year loan of $100,000. The interest rate is 8% per year, and the loan calls for equal annual payment.

• How much is the annual total loan payment?

• How much interest is paid in the first year?

• How much total interest is paid over the life of the loan? 

Excel hint:

 

 

Question 172.5 / 2.5 pts

For the above loan, how much interest is paid in the first year?

  

7500

 

  

8000

 

  

10000

 

  

9000

 

 

Question 182.5 / 2.5 pts

For the above loan, how much is the annual payment?

  

38803

 

  

33333

 

  

39803

 

  

48903

 

 

Question 192.5 / 2.5 pts

For the above loan, how much is the total interest paid over three years?

  

16410

 

  

16900

 

  

26410

 

  

26941

 

 

Question 202.5 / 2.5 pts

The yield-to-maturity of a bond with a finite maturity date is a function of all of the following variables except:

  

the current price

 

  

the required rate of return on the bond

 

  

the uniform annual interest payments

 

  

the maturity value

 

 

Question 212.5 / 2.5 pts

Which of the following statements concerning preferred stocks is true?

  

Preferred stock dividends per share are normally increased as the earnings of the firm increase.

 

  

Preferred dividends per share are usually not cut or suspended unless the firm is faced with serious financial problems.

 

  

The par value of a stock is always the same as the initial selling price.

 

  

Preferred stockholders have a prior claim on the income and assets of the firm as compared to the claims of lenders.

 

 

Question 222.5 / 2.5 pts

Potential sellers of an asset can be represented as a ___ schedule showing the ___ prices at which they are willing to sell given quantities of the asset.

  

supply, minimum

 

  

supply, average

 

  

supply, maximum

 

  

demand, maximum

 

 

Question 232.5 / 2.5 pts

When the required rate of return is ____ the coupon rate, the bond will sell at a discount.

  

equal to

 

  

the same as

 

  

less than

 

  Question 1

2.5 / 2.5 pts

_____ is interest that is paid not only on the principal, but also on any interest earned but not withdrawn during earlier periods.

  

compound interest

 

  

basic interest

 

  

future interest

 

  

simple interest

 

 

Question 22.5 / 2.5 pts

Finding the discounted current value of $1,000 to be received at the end of each of the next 5 years requires calculating the

  

present value of an annuity due

 

  

future value of an annuity due

 

  

present value of an annuity

 

  

future value of an annuity

 

 

Question 32.5 / 2.5 pts

An annuity due is one in which

  

payments or receipts occur forever.

 

  

payments or receipts occur at the beginning of each period.

 

  

payments or receipts occur at the end of each period.

 

  

cash flows occur continuously.

 

 

Question 42.5 / 2.5 pts

If the present value of a given sum is equal to its future value, then

  

the discount rate must be low

 

  

none of the answers is correct

 

  

the discount rate must be zero

 

  

the discount rate must be very high

 

 

Question 52.5 / 2.5 pts

The more frequent the compounding the

  

lesser the future value

 

  

greater the effective interest rate

 

  

greater the amount deposited

 

  

greater the present value

 

 

Question 62.5 / 2.5 pts

Determine how much $1,000 deposited in a savings account paying 8% (compounded annually) will be worth after 5 years.

Excel hint: FV(rate, nper, pmt = 0, pv, fv, type) = ??

  

$784

 

  

$1,400

 

  

$1,469

 

  

$5,526

 

 

The next two questions will be based on the following information.

Mr. Moore is 35 years old today and is beginning to plan for his retirement. He wants to set aside an equal amount at the end of each of the next 25 years so that he can retire at age 60. He expects to live to the maximum age of 80 and wants to be able to withdraw $25,000 per year from the account on his 61st through 80th birthdays. The account is expected to earn 10 percent per annum for the entire period of time.

 

Question 72.5 / 2.5 pts

Determine the value of pension at the age of 60 for all payments during age 61 - 80?

Excel hint: PV(rate, nper, pmt, fv = 0, type = 0) = ??

  

112,839.09

 

  

312,839.09

 

  

500,000.00

 

  

212,839.09

 

 

Question 82.5 / 2.5 pts

 Determine the size of the annual deposits that must be made by Mr. Moore from age 35 till 60 to achieve the future value of pension (at age 60.)

Excel hint: Pmt(rate, nper, pv, fv, type = 0) = ??

  

$23,449

 

  

$2,164

 

  

$212,850

 

  

$8,514

 

 

Question 92.5 / 2.5 pts

You sold 100 shares of stock today for $30 per share that you paid $20 for 6 years ago. Determine the average annual rate of return on your investment, assuming the stock paid no dividends.

 

Excel hint: Rate(nper, pmt =0, pv, fv, type = 0, guess = 0.05) = ??

  

25%

 

  

150%

 

  

7%

 

  

8.33%

 

 

Question 102.5 / 2.5 pts

The Florida lottery agrees to pay the winner $250,000 at the end of each year for the next 20 years. What is the future value of this lottery if you plan to put each payment in an account earning 9 percent?

  

$12.79 million

 

  

$2.28 million

 

  

$5.00 million

 

  

$14.32 million

 

 

Question 112.5 / 2.5 pts

Many IRA fund managers argue that investors should invest at the beginning of the year rather than at the end. What is the difference to an investor who invests $2,000 per year at 11 percent over a 30 year period?

Excel hint:

Type = 0; ordinary annuity

Type = 1: annuity due

  

$54,244

 

  

There is no difference

 

  

$36,189

 

  

$43,785

 

 

Question 122.5 / 2.5 pts

New Jersey Mutual has offered you a single premium annuity that will pay you $12,000 per year (end of year) for the next 15 years. If you must pay $109,296 today for this annuity, what is your expected rate of return?

  

8%

 

  

7%

 

  

10%

 

  

9%

 

 

Question 132.5 / 2.5 pts

Designs Now is opening a showcase office to display and sell its computer designed poster art. Designs expects cash flows to be $120,000 in the first year, $180,000 in the second year, $240,000 in the third year. If Designs uses 11 percent as its discount rate, what is the present value of the cash flows?

  

$429,686

 

  

$457,620

 

  

$424,820

 

  

$456,758

 

 

IncorrectQuestion 140 / 2.5 pts

What is the present value of $1,000 received 2 years from today if the nominal interest rate is 9% (annual percentage rate) and compounded monthly?

 

Excel hint:

1) PV(rate, nper, pmt = 0, fv, type = 0)

2) Difference between APR and periodic discount rate

 

  

$836

 

  

$833

 

  

$914

 

  

$842

 

 

Question 152.5 / 2.5 pts

Which of the following statements is/are correct?

I. At 6% interest, the present value of: $400 for the first year, $600 for the second year, and $800 for the third year is $1,603.00.

II. The future value of the following mixed cash flow stream (if it is from an annuity due at 6% interest):$400 for the first year, $600 for the second year, and $800 for the third year is $1,999 (rounded).

  

Neither statement I nor II is correct.

 

  

Only statement I is correct.

 

  

Both statements I and II are correct.

 

  

Only statement II is correct.

 

 

Question 162.5 / 2.5 pts

Jenny Genius wants to purchase a new car. She knows that she can afford to pay $250 per month and that her bank will charge her 8% interest on the car loan. She intends to pay off the car in five years. Interest will be compounded monthly. Of the following, which is the most expensive vehicle in her price range that she could consider?

  

A Malibu selling for $12,320

 

  

A Celica selling for $17,500

 

  

A Civic selling for $14,670

 

  

A Taurus selling for $11,900

 

 

Amortized loan: The next three questions will be based on the following information. 

Prepare an amortization schedule for a three-year loan of $100,000. The interest rate is 8% per year, and the loan calls for equal annual payment.

• How much is the annual total loan payment?

• How much interest is paid in the first year?

• How much total interest is paid over the life of the loan? 

Excel hint:

 

 

Question 172.5 / 2.5 pts

For the above loan, how much interest is paid in the first year?

  

7500

 

  

8000

 

  

10000

 

  

9000

 

 

Question 182.5 / 2.5 pts

For the above loan, how much is the annual payment?

  

38803

 

  

33333

 

  

39803

 

  

48903

 

 

Question 192.5 / 2.5 pts

For the above loan, how much is the total interest paid over three years?

  

16410

 

  

16900

 

  

26410

 

  

26941

 

 

Question 202.5 / 2.5 pts

The yield-to-maturity of a bond with a finite maturity date is a function of all of the following variables except:

  

the current price

 

  

the required rate of return on the bond

 

  

the uniform annual interest payments

 

  

the maturity value

 

 

Question 212.5 / 2.5 pts

Which of the following statements concerning preferred stocks is true?

  

Preferred stock dividends per share are normally increased as the earnings of the firm increase.

 

  

Preferred dividends per share are usually not cut or suspended unless the firm is faced with serious financial problems.

 

  

The par value of a stock is always the same as the initial selling price.

 

  

Preferred stockholders have a prior claim on the income and assets of the firm as compared to the claims of lenders.

 

 

Question 222.5 / 2.5 pts

Potential sellers of an asset can be represented as a ___ schedule showing the ___ prices at which they are willing to sell given quantities of the asset.

  

supply, minimum

 

  

supply, average

 

  

supply, maximum

 

  

demand, maximum

 

 

Question 232.5 / 2.5 pts

When the required rate of return is ____ the coupon rate, the bond will sell at a discount.

  

equal to

 

  

the same as

 

  

less than

 

  Question 1

2.5 / 2.5 pts

_____ is interest that is paid not only on the principal, but also on any interest earned but not withdrawn during earlier periods.

  

compound interest

 

  

basic interest

 

  

future interest

 

  

simple interest

 

 

Question 22.5 / 2.5 pts

Finding the discounted current value of $1,000 to be received at the end of each of the next 5 years requires calculating the

  

present value of an annuity due

 

  

future value of an annuity due

 

  

present value of an annuity

 

  

future value of an annuity

 

 

Question 32.5 / 2.5 pts

An annuity due is one in which

  

payments or receipts occur forever.

 

  

payments or receipts occur at the beginning of each period.

 

  

payments or receipts occur at the end of each period.

 

  

cash flows occur continuously.

 

 

Question 42.5 / 2.5 pts

If the present value of a given sum is equal to its future value, then

  

the discount rate must be low

 

  

none of the answers is correct

 

  

the discount rate must be zero

 

  

the discount rate must be very high

 

 

Question 52.5 / 2.5 pts

The more frequent the compounding the

  

lesser the future value

 

  

greater the effective interest rate

 

  

greater the amount deposited

 

  

greater the present value

 

 

Question 62.5 / 2.5 pts

Determine how much $1,000 deposited in a savings account paying 8% (compounded annually) will be worth after 5 years.

Excel hint: FV(rate, nper, pmt = 0, pv, fv, type) = ??

  

$784

 

  

$1,400

 

  

$1,469

 

  

$5,526

 

 

The next two questions will be based on the following information.

Mr. Moore is 35 years old today and is beginning to plan for his retirement. He wants to set aside an equal amount at the end of each of the next 25 years so that he can retire at age 60. He expects to live to the maximum age of 80 and wants to be able to withdraw $25,000 per year from the account on his 61st through 80th birthdays. The account is expected to earn 10 percent per annum for the entire period of time.

 

Question 72.5 / 2.5 pts

Determine the value of pension at the age of 60 for all payments during age 61 - 80?

Excel hint: PV(rate, nper, pmt, fv = 0, type = 0) = ??

  

112,839.09

 

  

312,839.09

 

  

500,000.00

 

  

212,839.09

 

 

Question 82.5 / 2.5 pts

 Determine the size of the annual deposits that must be made by Mr. Moore from age 35 till 60 to achieve the future value of pension (at age 60.)

Excel hint: Pmt(rate, nper, pv, fv, type = 0) = ??

  

$23,449

 

  

$2,164

 

  

$212,850

 

  

$8,514

 

 

Question 92.5 / 2.5 pts

You sold 100 shares of stock today for $30 per share that you paid $20 for 6 years ago. Determine the average annual rate of return on your investment, assuming the stock paid no dividends.

 

Excel hint: Rate(nper, pmt =0, pv, fv, type = 0, guess = 0.05) = ??

  

25%

 

  

150%

 

  

7%

 

  

8.33%

 

 

Question 102.5 / 2.5 pts

The Florida lottery agrees to pay the winner $250,000 at the end of each year for the next 20 years. What is the future value of this lottery if you plan to put each payment in an account earning 9 percent?

  

$12.79 million

 

  

$2.28 million

 

  

$5.00 million

 

  

$14.32 million

 

 

Question 112.5 / 2.5 pts

Many IRA fund managers argue that investors should invest at the beginning of the year rather than at the end. What is the difference to an investor who invests $2,000 per year at 11 percent over a 30 year period?

Excel hint:

Type = 0; ordinary annuity

Type = 1: annuity due

  

$54,244

 

  

There is no difference

 

  

$36,189

 

  

$43,785

 

 

Question 122.5 / 2.5 pts

New Jersey Mutual has offered you a single premium annuity that will pay you $12,000 per year (end of year) for the next 15 years. If you must pay $109,296 today for this annuity, what is your expected rate of return?

  

8%

 

  

7%

 

  

10%

 

  

9%

 

 

Question 132.5 / 2.5 pts

Designs Now is opening a showcase office to display and sell its computer designed poster art. Designs expects cash flows to be $120,000 in the first year, $180,000 in the second year, $240,000 in the third year. If Designs uses 11 percent as its discount rate, what is the present value of the cash flows?

  

$429,686

 

  

$457,620

 

  

$424,820

 

  

$456,758

 

 

IncorrectQuestion 140 / 2.5 pts

What is the present value of $1,000 received 2 years from today if the nominal interest rate is 9% (annual percentage rate) and compounded monthly?

 

Excel hint:

1) PV(rate, nper, pmt = 0, fv, type = 0)

2) Difference between APR and periodic discount rate

 

  

$836

 

  

$833

 

  

$914

 

  

$842

 

 

Question 152.5 / 2.5 pts

Which of the following statements is/are correct?

I. At 6% interest, the present value of: $400 for the first year, $600 for the second year, and $800 for the third year is $1,603.00.

II. The future value of the following mixed cash flow stream (if it is from an annuity due at 6% interest):$400 for the first year, $600 for the second year, and $800 for the third year is $1,999 (rounded).

  

Neither statement I nor II is correct.

 

  

Only statement I is correct.

 

  

Both statements I and II are correct.

 

  

Only statement II is correct.

 

 

Question 162.5 / 2.5 pts

Jenny Genius wants to purchase a new car. She knows that she can afford to pay $250 per month and that her bank will charge her 8% interest on the car loan. She intends to pay off the car in five years. Interest will be compounded monthly. Of the following, which is the most expensive vehicle in her price range that she could consider?

  

A Malibu selling for $12,320

 

  

A Celica selling for $17,500

 

  

A Civic selling for $14,670

 

  

A Taurus selling for $11,900

 

 

Amortized loan: The next three questions will be based on the following information. 

Prepare an amortization schedule for a three-year loan of $100,000. The interest rate is 8% per year, and the loan calls for equal annual payment.

• How much is the annual total loan payment?

• How much interest is paid in the first year?

• How much total interest is paid over the life of the loan? 

Excel hint:

 

 

Question 172.5 / 2.5 pts

For the above loan, how much interest is paid in the first year?

  

7500

 

  

8000

 

  

10000

 

  

9000

 

 

Question 182.5 / 2.5 pts

For the above loan, how much is the annual payment?

  

38803

 

  

33333

 

  

39803

 

  

48903

 

 

Question 192.5 / 2.5 pts

For the above loan, how much is the total interest paid over three years?

  

16410

 

  

16900

 

  

26410

 

  

26941

 

 

Question 202.5 / 2.5 pts

The yield-to-maturity of a bond with a finite maturity date is a function of all of the following variables except:

  

the current price

 

  

the required rate of return on the bond

 

  

the uniform annual interest payments

 

  

the maturity value

 

 

Question 212.5 / 2.5 pts

Which of the following statements concerning preferred stocks is true?

  

Preferred stock dividends per share are normally increased as the earnings of the firm increase.

 

  

Preferred dividends per share are usually not cut or suspended unless the firm is faced with serious financial problems.

 

  

The par value of a stock is always the same as the initial selling price.

 

  

Preferred stockholders have a prior claim on the income and assets of the firm as compared to the claims of lenders.

 

 

Question 222.5 / 2.5 pts

Potential sellers of an asset can be represented as a ___ schedule showing the ___ prices at which they are willing to sell given quantities of the asset.

  

supply, minimum

 

  

supply, average

 

  

supply, maximum

 

  

demand, maximum

 

 

Question 232.5 / 2.5 pts

When the required rate of return is ____ the coupon rate, the bond will sell at a discount.

  

equal to

 

  

the same as

 

  

less than

 

  Question 1

2.5 / 2.5 pts

_____ is interest that is paid not only on the principal, but also on any interest earned but not withdrawn during earlier periods.

  

compound interest

 

  

basic interest

 

  

future interest

 

  

simple interest

 

 

Question 22.5 / 2.5 pts

Finding the discounted current value of $1,000 to be received at the end of each of the next 5 years requires calculating the

  

present value of an annuity due

 

  

future value of an annuity due

 

  

present value of an annuity

 

  

future value of an annuity

 

 

Question 32.5 / 2.5 pts

An annuity due is one in which

  

payments or receipts occur forever.

 

  

payments or receipts occur at the beginning of each period.

 

  

payments or receipts occur at the end of each period.

 

  

cash flows occur continuously.

 

 

Question 42.5 / 2.5 pts

If the present value of a given sum is equal to its future value, then

  

the discount rate must be low

 

  

none of the answers is correct

 

  

the discount rate must be zero

 

  

the discount rate must be very high

 

 

Question 52.5 / 2.5 pts

The more frequent the compounding the

  

lesser the future value

 

  

greater the effective interest rate

 

  

greater the amount deposited

 

  

greater the present value

 

 

Question 62.5 / 2.5 pts

Determine how much $1,000 deposited in a savings account paying 8% (compounded annually) will be worth after 5 years.

Excel hint: FV(rate, nper, pmt = 0, pv, fv, type) = ??

  

$784

 

  

$1,400

 

  

$1,469

 

  

$5,526

 

 

The next two questions will be based on the following information.

Mr. Moore is 35 years old today and is beginning to plan for his retirement. He wants to set aside an equal amount at the end of each of the next 25 years so that he can retire at age 60. He expects to live to the maximum age of 80 and wants to be able to withdraw $25,000 per year from the account on his 61st through 80th birthdays. The account is expected to earn 10 percent per annum for the entire period of time.

 

Question 72.5 / 2.5 pts

Determine the value of pension at the age of 60 for all payments during age 61 - 80?

Excel hint: PV(rate, nper, pmt, fv = 0, type = 0) = ??

  

112,839.09

 

  

312,839.09

 

  

500,000.00

 

  

212,839.09

 

 

Question 82.5 / 2.5 pts

 Determine the size of the annual deposits that must be made by Mr. Moore from age 35 till 60 to achieve the future value of pension (at age 60.)

Excel hint: Pmt(rate, nper, pv, fv, type = 0) = ??

  

$23,449

 

  

$2,164

 

  

$212,850

 

  

$8,514

 

 

Question 92.5 / 2.5 pts

You sold 100 shares of stock today for $30 per share that you paid $20 for 6 years ago. Determine the average annual rate of return on your investment, assuming the stock paid no dividends.

 

Excel hint: Rate(nper, pmt =0, pv, fv, type = 0, guess = 0.05) = ??

  

25%

 

  

150%

 

  

7%

 

  

8.33%

 

 

Question 102.5 / 2.5 pts

The Florida lottery agrees to pay the winner $250,000 at the end of each year for the next 20 years. What is the future value of this lottery if you plan to put each payment in an account earning 9 percent?

  

$12.79 million

 

  

$2.28 million

 

  

$5.00 million

 

  

$14.32 million

 

 

Question 112.5 / 2.5 pts

Many IRA fund managers argue that investors should invest at the beginning of the year rather than at the end. What is the difference to an investor who invests $2,000 per year at 11 percent over a 30 year period?

Excel hint:

Type = 0; ordinary annuity

Type = 1: annuity due

  

$54,244

 

  

There is no difference

 

  

$36,189

 

  

$43,785

 

 

Question 122.5 / 2.5 pts

New Jersey Mutual has offered you a single premium annuity that will pay you $12,000 per year (end of year) for the next 15 years. If you must pay $109,296 today for this annuity, what is your expected rate of return?

  

8%

 

  

7%

 

  

10%

 

  

9%

 

 

Question 132.5 / 2.5 pts

Designs Now is opening a showcase office to display and sell its computer designed poster art. Designs expects cash flows to be $120,000 in the first year, $180,000 in the second year, $240,000 in the third year. If Designs uses 11 percent as its discount rate, what is the present value of the cash flows?

  

$429,686

 

  

$457,620

 

  

$424,820

 

  

$456,758

 

 

IncorrectQuestion 140 / 2.5 pts

What is the present value of $1,000 received 2 years from today if the nominal interest rate is 9% (annual percentage rate) and compounded monthly?

 

Excel hint:

1) PV(rate, nper, pmt = 0, fv, type = 0)

2) Difference between APR and periodic discount rate

 

  

$836

 

  

$833

 

  

$914

 

  

$842

 

 

Question 152.5 / 2.5 pts

Which of the following statements is/are correct?

I. At 6% interest, the present value of: $400 for the first year, $600 for the second year, and $800 for the third year is $1,603.00.

II. The future value of the following mixed cash flow stream (if it is from an annuity due at 6% interest):$400 for the first year, $600 for the second year, and $800 for the third year is $1,999 (rounded).

  

Neither statement I nor II is correct.

 

  

Only statement I is correct.

 

  

Both statements I and II are correct.

 

  

Only statement II is correct.

 

 

Question 162.5 / 2.5 pts

Jenny Genius wants to purchase a new car. She knows that she can afford to pay $250 per month and that her bank will charge her 8% interest on the car loan. She intends to pay off the car in five years. Interest will be compounded monthly. Of the following, which is the most expensive vehicle in her price range that she could consider?

  

A Malibu selling for $12,320

 

  

A Celica selling for $17,500

 

  

A Civic selling for $14,670

 

  

A Taurus selling for $11,900

 

 

Amortized loan: The next three questions will be based on the following information. 

Prepare an amortization schedule for a three-year loan of $100,000. The interest rate is 8% per year, and the loan calls for equal annual payment.

• How much is the annual total loan payment?

• How much interest is paid in the first year?

• How much total interest is paid over the life of the loan? 

Excel hint:

 

 

Question 172.5 / 2.5 pts

For the above loan, how much interest is paid in the first year?

  

7500

 

  

8000

 

  

10000

 

  

9000

 

 

Question 182.5 / 2.5 pts

For the above loan, how much is the annual payment?

  

38803

 

  

33333

 

  

39803

 

  

48903

 

 

Question 192.5 / 2.5 pts

For the above loan, how much is the total interest paid over three years?

  

16410

 

  

16900

 

  

26410

 

  

26941

 

 

Question 202.5 / 2.5 pts

The yield-to-maturity of a bond with a finite maturity date is a function of all of the following variables except:

  

the current price

 

  

the required rate of return on the bond

 

  

the uniform annual interest payments

 

  

the maturity value

 

 

Question 212.5 / 2.5 pts

Which of the following statements concerning preferred stocks is true?

  

Preferred stock dividends per share are normally increased as the earnings of the firm increase.

 

  

Preferred dividends per share are usually not cut or suspended unless the firm is faced with serious financial problems.

 

  

The par value of a stock is always the same as the initial selling price.

 

  

Preferred stockholders have a prior claim on the income and assets of the firm as compared to the claims of lenders.

 

 

Question 222.5 / 2.5 pts

Potential sellers of an asset can be represented as a ___ schedule showing the ___ prices at which they are willing to sell given quantities of the asset.

  

supply, minimum

 

  

supply, average

 

  

supply, maximum

 

  

demand, maximum

 

 

Question 232.5 / 2.5 pts

When the required rate of return is ____ the coupon rate, the bond will sell at a discount.

  

equal to

 

  

the same as

 

  

less than