Question : 41.An annuity can best be described as a.a set of payments : 1325656

 

41.An annuity can best be described as

a.a set of payments to be received during a period of time.

b.a stream of payments to be received at a common interval over the life of the payments.

c.an even stream of payments to be received at a common interval over the life of the payments.

d.the present value of a set of payments to be received during a future period of time.

42.Which of the following should have the greatest value if the discount rate applying to the cash flows is a positive value?

a.the present value of a $5 payment of to be received one year from today.

b.the future value of a $5 payment received today but invested for one year.

c.the present value of a stream of $5 payments to be received at the end of the next two years.

d.the future value of a stream of $5 payments to be received at the end of the next two years.

43.What is the present value of $25 to be received at the end of each year for the next 6 years if the discount rate is 12%?

a.$125.00

b.$113.06

c.$102.79

d.none of the above

44.What is the present value of $25 to be received at the beginning of each year for the next 6 years if the discount rate is 12%?

a.$125.00

b.$126.63

c.$115.12

d.none of the above

45.Forever Insurance Company has offered to pay you or your heirs $100 per year at the end of each year forever. If the correct discount rate for such a cash flow is 13%, what the amount that you would be willing to pay Forever Insurance for this set of cash flows?

a.$1,000.00

b.$869.23

c.$769.23

d.$100

46.You would like to have $1,000 one year (365 days) from now and you find that the bank is paying 7% compounded daily. How much will you have to deposit with the bank today to be able to have the $1,000?

a.$934.58

b.$933.51

c.$932.40

d.none of the above

47.By increasing the number of compounding periods in a year, while holding the annual percentage rate constant, you will

a.decrease the annual percentage yield.

b.increase the annual percentage yield.

c.not effect the annual percentage yield.

d.increase the dollar return on an investment but will decrease the annual percentage yield.

48.The ratio of interest to principal repayment on an amortizing loan

a.increases as the loan gets older.

b.decreases as the loan gets older.

c.remains constant over the life of the loan.

d.changes according to the level of market interest rates during the life of the loan.

49.You are trying to accumulate $2,000 at the end of 5 years by contributing a fixed amount at the end of each year. You initially decide to contribute $300 per year but find that you are coming up short of the $2,000 goal. What could you do to increase the value of the investment at the end of year 5?

a.invest in an investment that has a lower rate of return.

b.invest in an investment that has a higher rate of return.

c.make a sixth year contribution.

d.contribute a smaller amount each year.

50.If you hold the annual percentage rate constant while increasing the number of compounding periods per year, then

a.the effective interest rate will increase.

b.the effective interest rate will decrease.

c.the effective interest rate will not change.

d.none of the above.

 

 

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