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finance homework mcq




Question;In January of 1997, the U.S. Consumer Price Index (CPI);stood at 159.1. By January of 2011, the level had risen to 220.2. What was the;average annual rate of inflation over this time period as measured by the CPI?;A. 2.60%;B. 2.97%;C. 2.35%;D. 3.31%;Question 2 of 20 0.0/;5.0 Points;If you borrow $100,000 at an annual rate of 8.00% 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?;A. Compound loan;B. Amortized loan;C. Interest-only loan;D. Discount loan;Question 3 of 20 0.0/;5.0 Points;You just won a lottery - CONGRATULATIONS! Your parents have;always told you to plan for the future, so since you already have a well-paying;job you decide to invest rather than spend your lottery winnings. The payment;schedule from the lottery commission is $100,000 after taxes at end of year one;and 19 more payments of exactly $100,000 after taxes in equal annual;end-of-the-year deposits (i.e., the first of the next 19 deposits is one year;from today) into your account paying 7% compounded annually. How much money;will be in your account after the last deposit is made?;A. $2,000,000.00;B. $3,637,896.48;C. $4,486,517.68;D. $4,099,549.23;Question 4 of 20 0.0/;5.0 Points;The one-time payment of money at a future date is often;called a ________.;A. perpetuity payment;B. lump-sum payment;C. principal amount;D. present value;Question 5 of 20 0.0/;5.0 Points;Four years ago, Robert's annual salary was $52,500. Today;he earns $73,800. What has been the average annual rate of growth of Robert's;salary?;A. 8.89%;B. 41.52%;C. 10.38%;D. $5,325 per year;Question 6 of 20 0.0/;5.0 Points;You have an annuity of equal annual end-of-the-year cash;flows of $500 that begin two years from today and last for a total of ten cash;flows. Using a discount rate of 4%, what are those cash flows worth in today's;dollars?;A. $5,000.00;B. $4,055.45;C. $4,380.24;D. $3,899.47;Question 7 of 20 0.0/;5.0 Points;What type of loan requires both principal and interest;payments as you go by making equal payments each period?;A. Interest-only loan;B. Amortized loan;C. Compound loan;D. Discount loan;Question 8 of 20 0.0/;5.0 Points;For much of the 20th century, new car prices rose at an;annual rate of 5.73%. Given a beginning new car price of $600, how long did it;take for the average new car price to rise to $16,950? Please round to the nearest;year.;A. 70 years;B. 100 years;C. 40 years;D. 60 years;Question 9 of 20 0.0/;5.0 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.;A. $3,265,823.60;B. $1,664,670.52;C. $1,789,520.81;D. There is not enough information to answer this question.;Question 10 of 20 0.0/;5.0 Points;Johnson has an annuity due that pays $600 per year for 15;years. What is the present value of the cash flows if they are discounted at an;annual rate of 7.50%?;A. $9,675.00;B. $5,296.27;C. $5,693.49;D. $9,000.00;Question 11 of 20 0.0/;5.0 Points;You have accumulated $800,000 for your retirement. How much;money can you withdraw in equal annual beginning-of-the-year cash flows if you;invest the money at a rate of 7% for thirty years?;A. $64,469.12;B. $8,469.12;C. $60,251.52;D. $9,061.96;Question 12 of 20 0.0/;5.0 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?;A. $777,169.56;B. $2,606,942.58;C. $839,343.12;D. $120,000.00;Question 13 of 20 0.0/;5.0 Points;You have just turned 25 and may now spend a portion of the;trust fund your parents established for you. The terms of the trust fund allow;you to withdraw 60 beginning-of-the-year cash flows of $100,000 each. An;investment firm has offered to pay you cash for all of the fund today. If the;rate they use to discount the cash flows is 16% per year, what is their offer;price today for your pension fund?;A. $6,000,000.00;B. $724,901.63;C. $4,605,750,853;D. $624,915.20;Question 14 of 20 0.0/;5.0 Points;A two-year investment of $200 is made today at an annual;interest rate of 6%. Which of the following statements is true?;A. The FV is $224.00.;B. The FV is $224.72.;C. The PV is $178.00.;D. This question is irrelevant because there are no two-year;investments that earn an average of 6% per year.;Question 15 of 20 0.0/;5.0 Points;Which of the following is NOT a form of perpetuity?;A. Preferred stock that pays the same dividend forever;B. A philanthropic endowment fund that pays the same;charitable amount every year forever;C. A British consol bond;D. All are examples of perpetuities.;Question 16 of 20 0.0/;5.0 Points;Twelve years ago, you paid for the right to twelve $25,000;annual end-of-the-year cash flows. If discounting the cash flows at an annual;rate of 8%, what did you pay for these cash flows back then?;A. $203,474.11;B. $188,401.95;C. $300,000.00;D. $474,428.16;Question 17 of 20 0.0/;5.0 Points;Which of the following is NOT true with regard to an;amortization table?;A. The remaining principal balance at the end of a payment;period is equal to the beginning-of-the-period principal less the total;payment.;B. The total payment is calculated by using the present;value of an annuity formula.;C. The interest payment for a period is equal to the;periodic interest rate multiplied by the beginning-of-the-period principal;balance.;D. All of the above are true.;Question 18 of 20 0.0/;5.0 Points;The furniture store offers you no-money-down on a new set of;living room furniture. Further, you may pay for the furniture in three equal;annual end-of-the-year payments of $1,000 each with the first payment to be;made one year from today. If the discount rate is 6%, what is the present value;of the furniture payments?;A. $3,183.60;B. $2,833.39;C. $3,000.00;D. $2,673.01;Question 19 of 20 0.0/;5.0 Points;Which is greater, the present value of a five-year ordinary;annuity of $300 discounted at 10%, or the present value of a five-year ordinary;annuity of $300 discounted at 0% that has its first cash flow six years from;today?;A. The two annuities are of equal value.;B. The first annuity because the cash flows occur sooner.;C. The second annuity because the cash flows are discounted;at a lower interest rate.;D. The answer to this question cannot be determined.;Question 20 of 20 0.0/;5.0 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?;A. Discount loan;B. Interest-only loan;C. Amortized loan;D. Compound loan


Paper#49986 | Written in 18-Jul-2015

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