** **

**You have saved $47,000 for college and wish to use $15,000 per year. If you use the money as an ordinary annuity and earn 6.15% on your investment, how many years will your annuity last? Use a calculator to determine your answer.**

**Question options:**

** **

**4.27 years**

** **

**3.13 years**

** **

**3.59 years**

** **

**3.36 years**

** **

**Question 2**

**2.5 / 2.5 points**

** **

**An annuity is a series of:**

**Question options:**

** **

**variable cash payments at regular intervals across time.**

** **

**equal cash payments at regular intervals across time.**

** **

**variable cash payments at different intervals across time.**

** **

**equal cash payments at different intervals across time.**

** **

**Question 3**

**2.5 / 2.5 points**

** **

**If you borrow $100,000 at an annual rate of 8% for a 10-year period and repay the total amount of principal and interest due of $215,892.50 at the end of 10 years, what type of loan did you have?**

**Question options:**

** **

**Amortized loan**

** **

**Interest-only loan**

** **

**Discount loan**

** **

**Compound loan**

** **

**Question 4**

**2.5 / 2.5 points**

** **

**The main variables of the TVM equation are:**

**Question options:**

** **

**present value, future value, time, interest rate, and payment.**

** **

**present value, future value, perpetuity, interest rate, and payment.**

** **

**present value, future value, time, annuity, and interest rate.**

** **

**present value, future value, perpetuity, interest rate, and principal.**

** **

**Question 5**

**2.5 / 2.5 points**

** **

**You just won the Publisher’s Clearing House Sweepstakes and the right to 20 after-tax ordinary annuity cash flows of $163,291.18. Assuming a discount rate of 7.50%, what is the present value of your lottery winnings? Use a calculator to determine your answer.**

**Question options:**

** **

**$3,265,823.60**

** **

**$1,789,520.81**

** **

**$1,664,670.52**

** **

**There is not enough information to answer this question.**

** **

**Question 6**

**2.5 / 2.5 points**

** **

**You have just won the Reader’s Digest lottery of $5,000 per year for 20 years, with the first payment today followed by 19 more start-of-the-year cash flows. At an interest rate of 5%, what is the present value of your winnings?**

**Question options:**

** **

**$100,000**

** **

**$65,426.60**

** **

**$62,311.05**

** **

**$47,641.18**

** **

**Question 7**

**2.5 / 2.5 points**

** **

**What is the future value in Year 12 of an ordinary annuity cash flow of $6,000 per year at an interest rate of 4% per year?**

**Question options:**

** **

**$90,154.83**

** **

**$93,761.02**

** **

**$28,675.97**

** **

**$32,117.08**

** **

**Question 8**

**2.5 / 2.5 points**

** **

**What is the present value of a stream of annual end-of-the-year annuity cash flows if the discount rate is 0%, and the cash flows of $50 last for 20 years?**

**Question options:**

** **

**Less than $1,000**

** **

**Exactly $1,000**

** **

**More than $1,000**

** **

**This question cannot be answered because we have an interest rate of 0%.**

** **

**Question 9**

**2.5 / 2.5 points**

** **

**Which is greater, the present value of a $1,000 five-year ordinary annuity discounted at 10%, or the present value of a $1,000 five-year annuity due discounted at 10%?**

**Question options:**

** **

**The ordinary annuity is worth more with a present value of $3,790.79.**

** **

**The annuity due is worth more with a present value of $4,169.87.**

** **

**The ordinary annuity is worth more with a present value of $4,169.87.**

** **

**The annuity due is worth more with a present value of $4,586.85.**

** **

**Question 10**

**2.5 / 2.5 points**

** **

**What is the future value in Year 25 of an ordinary annuity cash flow of $2,000 per year at an interest rate of 10% per year?**

**Question options:**

** **

**$66,505.81**

** **

**$55,000.00**

** **

**$196,694.12**

** **

**$216,363.53**

** **

**Question 11**

**2.5 / 2.5 points**

** **

**Given the following cash flows, what is the future value at Year 6 when compounded at an interest rate of 8%?**

** **

**Year**

**0**

**2**

**4**

**6**

** **

**Cash Flow**

**$5,000**

**$7,000**

**$9,000**

**$11,000**

**Question options:**

** **

**$38,955.39**

** **

**$56,687.43**

** **

**$42,074.42**

** **

**$32,000**

** **

**Question 12**

**2.5 / 2.5 points**

** **

**If you borrow $100,000 at an annual rate of 8% for a 10-year period and repay with 10 equal annual end-of-the-year payments of $14,902.95, then you have just repaid what type of loan?**

**Question options:**

** **

**Amortized loan**

** **

**Interest-only loan**

** **

**Discount loan**

** **

**Compound loan**

** **

**Question 13**

**2.5 / 2.5 points**

** **

**Randy W. recently won the Western States Lottery of $6,500,000. The lottery pays either a total of twenty $325,000 payments per year with the first payment today (i.e., an annuity due), or $3,500,000 today. At what interest rate would Randy be financially indifferent between these two payout choices?**

**Question options:**

** **

**5.37%**

** **

**7.36%**

** **

**7.76%**

** **

**8.00%**

** **

**Question 14**

**2.5 / 2.5 points**

** **

**What type of loan makes interest payments throughout the life of the loan and then pays the principal and final interest payment at the maturity date?**

**Question options:**

** **

**Amortized loan**

** **

**Interest-only loan**

** **

**Discount loan**

** **

**Compound loan**

** **

**Question 15**

**0 / 2.5 points**

** **

**If you borrow $50,000 at an annual interest rate of 12% for six years, what is the annual payment (prior to maturity) on an interest-only type of loan?**

**Question options:**

** **

**$0**

** **

**$6,000**

** **

**$8,333.33**

** **

**$12,161.29**

** **

**Question 16**

**2.5 / 2.5 points**

** **

**If for the next 40 years you place $3,000 in equal year-end deposits into an account earning 8% per year, how much money will be in the account at the end of that time period?**

**Question options:**

** **

**$120,000.00**

** **

**$777,169.56**

** **

**$839,343.12**

** **

**$2,606,942.58**

** **

**Question 17**

**2.5 / 2.5 points**

** **

**If you borrow $100,000 at an annual rate of 8% for a 10-year period and repay the interest of $8,000 at the end of each year prior to maturity and the final payment of $108,000 at the end of 10 years, then you have just repaid what type of loan?**

**Question options:**

** **

**Amortized loan**

** **

**Interest-only loan**

** **

**Discount loan**

** **

**Compound loan**

** **

**Question 18**

**0 / 2.5 points**

** **

**Your firm intends to finance the purchase of a new construction crane. The cost is $1,500,000. How large is the payment at the end of Year 10 if the crane is financed at a rate of 8.50% as a discount loan?**

**Question options:**

** **

**$228,611.56**

** **

**$127,500**

** **

**$3,391,475.16**

** **

**There is not enough information to answer this question.**

** **

**Question 19**

**2.5 / 2.5 points**

** **

**Present value calculations do which of the following?**

**Question options:**

** **

**Compound all future cash flows into the future**

** **

**Compound all future cash flows back to the present**

** **

**Discount all future cash flows back to the present**

** **

**Discount all future cash flows into the future**

** **

**Question 20**

**2.5 / 2.5 points**

** **

**A/An __________ is a series of cash flows at regular intervals across time.**

**Question options:**

** **

**annuity**

** **

**annuity due**

** **

**perpetuity due**

** **

**None of the above**

** **

**Online Exam 5**

** **

**Question 21**

**2.5 / 2.5 points**

**Assume that Don is 45 years old and has 20 years for saving until he retires. He expects an APR of 8.5% on his investments. How much does he need to save if he puts money away annually in equal end-of-the-year amounts to achieve a future value of $1 million in 20 years’ time?**

**Question options:**

** **

**$20,570.00**

** **

**$20,670.97**

** **

**$20,770.90**

** **

**$20,800.00**

** **

**Question 22**

**2.5 / 2.5 points**

** **

**The phrase “price to rent money” is sometimes used to refer to:**

**Question options:**

** **

**historical prices.**

** **

**compound rates.**

** **

**discount rates.**

** **

**interest rates.**

** **

**Question 23**

**2.5 / 2.5 points**

** **

**Suppose you invest $1,000 today, compounded quarterly, with the annual interest rate of 5%. What is your investment worth in one year?**

**Question options:**

** **

**$1,025.00**

** **

**$1,500.95**

** **

**$1,025.27**

** **

**$1,050.95**

** **

**Question 24**

**2.5 / 2.5 points**

** **

**James is a rational investor wishing to maximize his return over a 20-year period. The current yield curve is inverted with one-year rates at 5% and 20-year rates at 3.5%. James will invest in the lower-rate 20-year bonds if:**

**Question options:**

** **

**he thinks rates will fall in the future and locking in long-term rates today may provide the highest long-run average return.**

** **

**he thinks rates will rise in the future and locking in long-term rates today may provide the lowest long-run average return.**

** **

**he thinks rates will remain flat at 5% in the future and locking in long-term rates today will prevent him from appearing greedy to those without this investment opportunity.**

** **

**James has no idea what to do and should just skip this question.**

** **

**Question 25**

**2.5 / 2.5 points**

** **

**Suppose you deposit money in a certificate of deposit (CD) at a bank. Which of the following statements is true?**

**Question options:**

** **

**The bank is borrowing money from you without a promise to repay that money with interest.**

** **

**The bank is lending money to you with a promise to repay that money with interest.**

** **

**The bank is technically renting money from you with a promise to repay that money with interest.**

** **

**The bank is lending money to you, but not borrowing money from you.**

** **

**Question 26**

**2.5 / 2.5 points**

** **

**Assume you just bought a new home and now have a mortgage on the home. The amount of the principal is $150,000, the loan is at 5% APR, and the monthly payments are spread out over 30 years. What is the loan payment? Use a calculator to determine your answer.**

**Question options:**

** **

**$798.95**

** **

**$805.23**

** **

**$850.32**

** **

**$903.47**

** **

**Question 27**

**2.5 / 2.5 points**

** **

**The two major components of the interest rate that cause rates to vary across different investment opportunities or loans are:**

**Question options:**

** **

**the default premium and the bankruptcy premium.**

** **

**the liquidity premium and the maturity premium.**

** **

**the default premium and the maturity premium.**

** **

**the inflation premium and the maturity premium.**

** **

**Question 28**

**2.5 / 2.5 points**

** **

**You put down 20% on a home with a purchase price of $300,000. The down payment is thus $60,000, leaving a balance owed of $240,000. The bank will loan you the remaining balance at 4.28% APR. You will make annual payments with a 20-year payment schedule. What is the annual annuity payment under this schedule?**

**Question options:**

** **

**$18,100.23**

** **

**$22,625.29**

** **

**$12,000.00**

** **

**$33,785.23**

** **

**Question 29**

**2.5 / 2.5 points**

** **

**Nominal interest rates are the sum of two major components. These components are:**

**Question options:**

** **

**the real interest rate and expected inflation.**

** **

**the risk-free rate and expected inflation.**

** **

**the real interest rate and default premium.**

** **

**the real interest rate and the T-bill rate.**

** **

**Question 30**

**2.5 / 2.5 points**

** **

**When interest rates are stated or given for loan repayments, it is assumed that they are __________ unless specifically stated otherwise.**

**Question options:**

** **

**daily rates**

** **

**annual percentage rates**

** **

**effective annual rates**

** **

**APYs**

** **

**Question 31**

**2.5 / 2.5 points**

** **

**The __________ compensates the investor for the additional risk that the loan will not be repaid in full.**

**Question options:**

** **

**default premium**

** **

**inflation premium**

** **

**real rate**

** **

**interest rate**

** **

**Question 32**

**2.5 / 2.5 points**

** **

**If you take out a loan from a bank, you will be charged:**

**Question options:**

** **

**for principal but not interest.**

** **

**for interest but not principal.**

** **

**for both principal and interest.**

** **

**for interest only.**

** **

**Question 33**

**2.5 / 2.5 points**

** **

**Which of the following statements is true if you increase your monthly payment above the required loan payment?**

**Question options:**

** **

**The extra portion of the payment does not go to the principal.**

** **

**You can significantly increase the number of payments needed to pay off the loan.**

** **

**The extra portion of the payment increases the principal.**

** **

**You can significantly reduce the number of payments needed to pay off the loan.**

** **

**Question 34**

**2.5 / 2.5 points**

** **

**We can write the true relationship between the nominal interest rate and the real rate and expected inflation as which of the following?**

**Question options:**

** **

**(1 + r) = (1 + r) × (1 + h*)**

** **

**r = (1 + r*) × (1 + h) – 1**

** **

**r* = (1 + r) × (1 + h) -1**

** **

**r = (1 + r*) × (1 + h) + 1**

** **

**Question 35**

**2.5 / 2.5 points**

** **

**Assume that you are willing to postpone consumption today and buy a certificate of deposit (CD) at your local bank. Your reward for postponing consumption implies that at the end of the year:**

**Question options:**

** **

**you will be able to consume fewer goods.**

** **

**you will be able to buy the same amount of goods or services.**

** **

**you will be able to buy fewer goods or services.**

** **

**you will be able to buy more goods or services.**

** **

**Question 36**

**2.5 / 2.5 points**

** **

**The typical payments on a consumer loan are made at:**

**Question options:**

** **

**the end of each day.**

** **

**the end of each week.**

** **

**the end of each month.**

** **

**the beginning of each month.**

** **

**Question 37**

**2.5 / 2.5 points**

** **

**What is the EAR if the APR is 10.52% and compounding is daily?**

**Question options:**

** **

**Slightly above 10.09%**

** **

**Slightly below 11.09%**

** **

**Slightly above 11.09%**

** **

**Over 11.25%**

** **

**Question 38**

**2.5 / 2.5 points**

** **

**Suppose you invest $2,000 today, compounded monthly, with an annual interest rate of 7.5%. What is your investment worth in one year?**

**Question options:**

** **

**$2,150**

** **

**$2,152.81**

** **

**$2,155.27**

** **

**$2,154.77**

** **

**Question 39**

**2.5 / 2.5 points**

** **

**Suppose you postpone consumption so that by investing at 8% you will have an extra $800 to spend in one year. Suppose that inflation is 4% during this time. What is the approximate real increase in your purchasing power?**

**Question options:**

** **

**$800**

** **

**$600**

** **

**$400**

** **

**$200**

** **

**Question 40**

**2.5 / 2.5 points**

** **

**Which of the following statements is true?**

**Question options:**

** **

**On many calculators the TVM key for interest is I/Y; this is Interest per Year, or the EAR rate.**

** **

**On many calculators the TVM key for interest is Y/I; this is Interest per Year, or the APR rate.**

** **

**On many calculators the TVM key for interest is I/Y; this is Interest per Year, or the APR rate.**

** **

**On many calculators the TVM key for a period is I/Y.**

The price is based on these factors:

Academic level

Number of pages

Urgency

Basic features

- Free title page and bibliography
- Unlimited revisions
- Plagiarism-free guarantee
- Money-back guarantee
- 24/7 support

On-demand options

- Writer’s samples
- Part-by-part delivery
- Overnight delivery
- Copies of used sources
- Expert Proofreading

Paper format

- 275 words per page
- 12 pt Arial/Times New Roman
- Double line spacing
- Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Delivering a high-quality product at a reasonable price is not enough anymore.

That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read moreEach paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read moreThanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read moreYour email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read moreBy sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more
## Recent Comments