Question : 61.Suppose you ready to buy your first house. To buy : 1325658

 

61.Suppose you are ready to buy your first house. To buy the house, you will take out a $140,000 mortgage from the bank. The bank offers you the mortgage for 30 years at an APR of 6.0% with interest compounded monthly. For your tenth monthly payment, what is the reduction in principal?

a.$145.77

b.$156.18

c.$327.24

d.$359.64

62.What is the future value of a 5-year ordinary annuity with annual payments of $250, evaluated at a 15 percent interest rate?

a.$670.44

b.$838.04

c.$1,250

d.$1,685.60

63.The present value of an ordinary annuity is $2,000. The annuity features monthly payments from an account that pays 12% APR (with monthly compounding). If this was an annuity due, what would be the present value? (assume that same interest rate and same payments)

a.$1,785.71

b.$1,980.20

c.$2,020.00

d.$2,080.00

64.Suppose that Hoosier Farms offers an investment that will pay $10 per year forever. How much is this offer worth if you need a 8% return on your investment?

a.$8

b.$80

c.$100

d.$125

65.Suppose a professional sports team convinces a former player to come out of retirement and play for three seasons. They offer the player $2 million in year 1, $3 million in year 2, and $4 million in year 3. Assuming end of year payments of the salary, how would we find the value of his contract today if the player has a discount rate of 12%?

a.PV =

b.PV =

c.PV =

d.PV =

66.Which statement is FALSE concerning the time value of money?

a.The greater the compound frequency, the greater the EAR.

b.The EAR is always greater than the APR.

c.An account that pays simple interest will have a lower FV than an account that pays compound interest.

d.The stated interest rate is also referred to as the APR.

67.Suppose you made a $10,000 investment ten years ago in a speculative stock fund. Your investment today is worth $100,000. What annual compounded return did you earn over the ten year period?

a.10%

b.15%

c.25.89%

d.27.54%

68.An athlete was offered the following contract for the next three years:

Year123

Cashflow$5 million$7 million$9 million

 

The athlete would rather have his salary in equal amounts at the END of each of the three years. If the discount rate for the athlete is 10%, what yearly amount would she consider EQUIVALENT to the offered contract?

a.$5.37 million per year

b.$5.70 million per year

c.$6.71 million per year

d.$6.87 million per year

69.Which of the following investment opportunities has the highest present value if the discount rate is 10%?

 

Investment AInvestment BInvestment C

Year 0$200$300$400

Year 1$300$350$350

Year 2$400$400$300

Year 3$400$350$250

Year 4$400$300$200

a.Investment A

b.Investment B

c.Investment C

d.The present value of Investments A and C are equal and higher than the present value of Investment B.

70.A bank is offering a new savings account that pays 8% per year. Which formula below shows the calculation for determining how long it will take a $100 investment to double?

a.n =

b.n = 1.08ln(2)

c.n = 2ln(1.08)

d.n =

 

 

 

 

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