Fin3680

Earnest T needs $860 for his next trip to Raleigh. He has $660 in cash. How long in years will it take the $660 cash to grow to $860 if Earnest T earns 8.6% per annum on his cash, compounded quarterly? (Enter your answers in years to 2 decimal places, e.g., 12.34)

3.11

You are comparing two annuities which offer quarterly payments of $2,500 for five years and pay 0.75 percent interest per month. Annuity A will pay you on the first of each month while annuity B will pay you on the last day of each month. Which one of the following statements is correct concerning these two annuities?

Annuity B has a smaller present value than annuity A.

At what per annum rate must $228 be compounded monthly for it to grow to $531 in 8 years? (Round to 100th of a percent and enter your answer as a percentage, e.g., 12.34 for 12.34%)

Notice that there is monthly compounding. Solve for rate (r) where FV = PV x (1 + r/12)^(years * 12). Then convert rate to a per annum amount by multiplying by 12.

You are comparing two investment options that each pay 5 percent interest, compounded annually. Both options will provide you with $12,000 of income. Option a pays three annual payments starting with $2,000 the first year followed by two annual payments of $5,000 each. Option B pays three annual payments of $4,000 each. Which one of the following statements is correct given these two investment options?

Option B has a higher present value at time zero than does option A.

The entire repayment of which one of the following loans is computed simply by computing a single future value?

Pure discount loan

Sam I Am invests $173,000 today at 11% per annum, compounded quarterly. What will the balance of Sam's investment be in 6 years? (Round your answer to the nearest penny.)

Solve for FV. FV = PV * (1 + rate/m)^(years * m) where m = number of compounding periods per year. The correct answer is: 331749.32

Your rich aunt has promised to give your $5500 in 2 years. How much should you be willing to receive today (in lieu of the $5500 in 2 years) if you can earn 6% per annum, compounded semi-annually? (Round to nearest penny, e.g. 1234.56)

Solve for PV = FV/(1+r)^t, note that r = per annum rate/2 and t=years * 2 since compounding is semi-annual. The correct answer is: 4886.68

Which one of the following statements related to annuities and perpetuities is correct?

The correct answer is: A perpetuity comprised of $100 monthly payments is worth more than an annuity comprised of $100 monthly payments, given an interest rate of 12 percent, compounded monthly

Which one of the following statements is correct given the following two sets of project cash flows? Project A Project B Year 1 $6,000 $2,000 Year 2 0 3,000 Year 3 2,500 3,000 Year 4 2,500 3,000

The correct answer is: As long as the discount rate is positive, Project B will always be worth less today than will Project A.

Which one of the following statements correctly states a relationship? Select one: a. Time and future values are inversely related, all else held constant. b. An increase in time increases the future value given a zero rate of interest. c. An increase in the discount rate increases the present value, given positive rates. d. Interest rates and time are positively related, all else held constant. e. Time and present value are inversely related, all else held constatnt.

The correct answer is: Time and present value are inversely related, all else held constatnt.

You need $25,000 today and have decided to take out a loan at 7 percent for five years. Which one of the following loans would be the least expensive/ Assume all loans require monthly payments and that interest is compounded on a monthly basis.

The correct answer is: amortized loan with equal principal payments

Question text Which one of the following statements concerning interest rates is correct?

The effective annual rate equals the annual percentage rate when interest is compounded annually.

Which one of the following statements correctly states a relationship?

Time and present value are inversely related, all else held constatnt.

Which one of the following terms is used to describe a loan wherein each payment is equal in amount and includes both interest and principal?

amortized loan

You need $25,000 today and have decided to take out a loan at 7 percent for five years. Which one of the following loans would be the least expensive/ Assume all loans require monthly payments and that interest is compounded on a monthly basis.

amortized loan with equal principal payments

What is the interest rate charged per period multiplied by the number of periods per year called?

annual percentage rate

Which one of the following terms is defines as a loan wherein the regular payments, including both interest and principal amounts, are insufficient to retire the entire loan amount, which then must be repaid in one lump sum?

balloon loan

Which one of the following terms is used to identify a British perpetuity?

consol

A loan where the borrower receives money today and repays a single lump sum on a future date is called a(n) ______ loan.

discount

A monthly interest rate expressed as an annual rate would be an example of which one of the following rates?

effective annual rate

An ordinary annuity is best defined by which one of the following?

equal payments paid at regular intervals over a stated time period

Which one of the following terms is used to describe a loan that calls for periodic interest payments and a lump sum principal payment?

interest-only loan

The interest rate that is quoted by a lender is referred to as which one of the following?

stated interest rate

Which one of the following accurately defines a perpetuity?

unending equal payments paid at equal time intervals