Question : 51.A young couple buys their dream house. After paying their : 1325657

51.A young couple buys their dream house. After paying their down payment and closing costs, the couple has borrowed $400,000 from the bank. The terms of the mortgage are 30 years of monthly payments at an APR of 6% with monthly compounding. What is the monthly payment for the couple?

a.$2,398.20

b.$2,421.63

c.$2,697.98

d.$2,700.00

52.A young couple buys their dream house. After paying their down payment and closing costs, the couple has borrowed $400,000 from the bank. The terms of the mortgage are 30 years of monthly payments at an APR of 6% with monthly compounding. Suppose the couple wants to pay off their mortgage early, and will make extra payments to accomplish this goal. Specifically, the couple will pay an EXTRA $2,000 every 12 months (this extra amount is in ADDITION to the regular scheduled mortgage payment). The first extra $2,000 will be paid after month 12. What will be the balance of the loan after the first year of the mortgage?

a.$392,940.44

b.$393,087.95

c.$394,090.84

d.$397,601.80

53.Uncle Fester puts $50,000 into a bank account earning 6%. You can’t withdraw the money until the balance has doubled. How long will you have to leave the money in the account?

a.9 years

b.10 years

c.11 years

d.12 years

54.Which of the following statements are TRUE?

Statement I:As you increase the interest rate, the future value of an investment increases.

Statement II:As you increase the length of the investment (to receive some lump sum), the present value of the investment increases.

Statement III:The present value of an ordinary annuity is larger than the present value of an annuity due. (all else equal)

a.Statement I only

b.Statements I and II

c.Statement II only

d.Statements I and III only

55.Consider the following set of cashflows to be received over the next 3 years:

Year123

Cashflow$100$225$300

If the discount rate is 10%, how would we write the formula to find the Future Value of this set of cash flows at year 3?

a.

b.$100 (1.10) + $225 (1.10) + $300 (1.10)

c.$100 (1.10)3 + $225 (1.10)2 + $300 (1.10)

d.$100 (1.10)2 + $225 (1.10) + $300

56.Which is NOT correct regarding an ordinary annuity and annuity due?

a.An annuity is a series of equal payments.

b.The present value of an ordinary annuity is less than the present value of an annuity due (assuming interest rate is positive).

c.As the interest rate increases, the present value of an annuity decreases.

d.As the length of the annuity increases, the future value of the annuity decreases.

57.After graduating from college with a finance degree, you begin an ambitious plan to retire in 25 years. To build up your retirement fund, you will make quarterly payments into a mutual fund that on average will pay 12% APR compounded quarterly. To get you started, a relative gives you a graduation gift of $5,000. Once retired, you plan on moving your investment to a money market fund that will pay 6% APR with monthly compounding. As a young retiree, you believe you will live for 30 more years and will make monthly withdrawals of $10,000. To meet your retirement needs, what quarterly payment should you make?

a.$2,221.45

b.$2,588.27

c.$2,746.50

d.$2,904.73

58.A bank account has a rate of 12% APR with quarterly compounding. What is the EAR for the account?

a.3.00%

b.12.00%

c.12.36%

d.12.55%

59.An investor puts $200 in a money market account TODAY that returns 3% per year with monthly compounding. The investor plans to keep his money in the account for 2 years. What is the future value of his investment when he closes the account two years from today?

a.$215.00

b.$212.35

c.$206.08

d.$188.37

60.Suppose you take out a loan from the local mob boss for $10,000. Being a generous banker, the mob boss offers you an APR of 60% with monthly compounding. The length of the loan is 3 years with monthly payments. However, you want to get out of this arrangement as quickly as possible. You decide to pay off whatever balance remains after the first year of payments. What is your remaining balance after one year?

a.$8,124.46

b.$8,339.13

c.$9,233.06

d.$9,342.47