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FIN 3716: Practice Exam 2
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Gravity
Instructor: Junbo Wang
Terms in this set (14)
What is the future value of $7,189 invested for 23 years at 9.25 percent compounded annually?
A. $22,483.60
B. $27,890.87
C. $38,991.07
D. $51,009.13
E. $54,999.88
E. $54,999.88
You would like to give your daughter $75,000 towards her college education 17 years from now. How much money must you set aside today for this purpose if you can earn 8 percent on your investments?
A. $18,388.19
B. $20,270.17
C. $28,417.67
D. $29,311.13
E. $32,488.37
B. $20,270.17
You want to have $35,000 saved 6 years from now to buy a house. How much less do you have to deposit today to reach this goal if you can earn 5.5 percent rather than 5 percent on your savings? Today's deposit is the only deposit you will make to this savings account.
A. $733.94
B. $791.18
C. $824.60
D. $845.11
E. $919.02
A. $733.94
Assume the average vehicle selling price in the United States last year was $41,996. The average price 9 years earlier was $29,000. What was the annual increase in the selling price over this time period?
A. 3.89 percent
B. 4.20 percent
C. 4.56 percent
D. 5.01 percent
E. 5.40 percent
B. 4.20 percent
The entire repayment of which one of the following loans is computed simply by computing a single future value?
A. interest-only loan
B. balloon loan
C. amortized loan
D. pure discount loan
E. bullet loan
D. pure discount loan
You just won the grand prize in a national writing contest! As your prize, you will receive $2,000 a month for ten years. If you can earn 7 percent on your money, what is this prize worth to you today?
A. $172,252.71
B. $178,411.06
C. $181,338.40
D. $185,333.33
E. $190,450.25
A. $172,252.71
You have $5,600 that you want to use to open a savings account. There are five banks located in your area. The rates paid by banks A through E, respectively, are given below. Which bank should you select if your goal is to maximize your interest income?
A. 3.26 percent, compounded annually
B. 3.20 percent, compounded monthly
C. 3.25 percent, compounded semi-annually
D. 3.10 percent, compounded continuously (ignore this selection)
E. 3.15 percent, compounded quarterly
C. 3.25 percent, compounded semi-annually
You just paid $750,000 for an annuity that will pay you and your heirs $45,000 a year forever. What rate of return are you earning on this policy?
A. 5.25 percent
B. 5.50 percent
C. 5.75 percent
D. 6.00 percent
E. 6.25 percent
D. 6.00 percent
You are scheduled to receive annual payments of $4,800 for each of the next 7 years. The discount rate is 8 percent. What is the difference in the present value if you receive these payments at the beginning of each year rather than at the end of each year?
A. $1,999
B. $2,013
C. $2,221
D. $2,227
E. $2,304
A. $1,999
Mary just purchased a bond which pays $60 a year in interest. What is this $60 called?
A. coupon
B. face value
C. discount
D. call premium
E. yield
A. coupon
Interest rates that include an inflation premium are referred to as:
A. annual percentage rates
B. stripped rates
C. effective annual rates
D. real rates
E. nominal rates
E. nominal rates
A bond has a market price that exceeds its face value. Which of the following features currently apply to this bond?
I. discounted price
II. premium price
III. yield-to-maturity that exceeds the coupon rate
IV. yield-to-maturity that is less than the coupon rate
A. III only
B. I and III only
C. I and IV only
D. II and III only
E. II and IV only
E. II and IV only
Collingwood Homes has a bond issue outstanding that pays an 8.5 percent coupon and matures in 18.5 years. The bonds have a par value of $1,000 and a market price of $964.20. Interest is paid semiannually. What is the yield to maturity?
A. 8.36 percent
B. 8.42 percent
C. 8.61 percent
D. 8.74 percent
E. 8.90 percent
E. 8.90 percent
Oil Well Supply offers 7.5 percent coupon bonds with semiannual payments and a yield to maturity of 7.68 percent. The bonds mature in 6 years. What is the market price per bond if the face value is $1,000?
A. $989.70
B. $991.47
C. $996.48
D. $1,002.60
E. $1,013.48
B. $991.47
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