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Question;86. You grandfather won a lottery years ago. The value;of his winnings at the time was $50,000. He invested this money such that it;will provide annual payments of $2,400 a year to his heirs forever. What is the;rate of return?;A. 4.75 percent;B. 4.80 percent;C. 5.00 percent;D. 5.10 percent;E. 5.15 percent;87. The preferred stock of Casco has a 5.48 percent;dividend yield. The stock is currently priced at $59.30 per share. What is the;amount of the annual dividend?;A. $2.80;B. $2.95;C. $3.10;D. $3.25;E. $3.40;88. Your credit card company charges you 1.65 percent;interest per month. What is the annual percentage rate on your account?;A. 18.95 percent;B. 19.80 percent;C. 20.90 percent;D. 21.25 percent;E. 21.70 percent;89. What is the annual percentage rate on a loan with;a stated rate of 2.25 percent per quarter?;A. 9.00 percent;B. 9.09 percent;C. 9.18 percent;D. 9.27 percent;E. 9.31 percent;90. You are paying an effective annual rate of 18.974;percent on your credit card. The interest is compounded monthly. What is the;annual percentage rate on this account?;A. 17.50 percent;B. 18.00 percent;C. 18.25 percent;D. 18.64 percent;E. 19.00 percent;91. What is the effective annual rate if a bank;charges you 9.50 percent compounded quarterly?;A. 9.62 percent;B. 9.68 percent;C. 9.72 percent;D. 9.84 percent;E. 9.91 percent;92. Your credit card company quotes you a rate of 17.9;percent. Interest is billed monthly. What is the actual rate of interest you;are paying?;A. 19.03 percent;B. 19.21 percent;C. 19.44 percent;D. 19.57 percent;E. 19.72 percent;93. The Pawn Shop loans money at an annual rate of 21;percent and compounds interest weekly. What is the actual rate being charged on;these loans?;A. 23.16 percent;B. 23.32 percent;C. 23.49 percent;D. 23.56 percent;E. 23.64 percent;94. You are considering two loans. The terms of the;two loans are equivalent with the exception of the interest rates. Loan A;offers a rate of 7.75 percent, compounded daily. Loan B offers a rate of 8;percent, compounded semi-annually. Which loan should you select and why?;A. A, the effective annual rate is 8.06 percent.;B. A, the annual percentage rate is 7.75 percent.;C. B, the annual percentage rate is 7.68 percent.;D. B, the effective annual rate is 8.16 percent.;E. The loans are equivalent offers so you can select either one.;95. You have $5,600 that you want to use to open a;savings account. There are five banks located in your area. The rates paid by;banks A through E, respectively, are given below. Which bank should you select;if your goal is to maximize your interest income?;A. 3.26 percent, compounded annually;B. 3.20 percent, compounded monthly;C. 3.25 percent, compounded semi-annually;D. 3.10 percent, compounded continuously;E. 3.15 percent, compounded quarterly;96. What is the effective annual rate of 14.9 percent;compounded continuously?;A. 15.59 percent;B. 15.62 percent;C. 15.69 percent;D. 15.84 percent;E. 16.07 percent;97. What is the effective annual rate of 9.75 percent;compounded continuously?;A. 10.17 percent;B. 10.24 percent;C. 10.29 percent;D. 10.33 percent;E. 10.47 percent;98. City Bank wants to appear competitive based on;quoted loan rates and thus must offer a 7.75 percent annual percentage rate on;its loans. What is the maximum rate the bank can actually earn based on the;quoted rate?;A. 8.06 percent;B. 8.14 percent;C. 8.21 percent;D. 8.26 percent;E. 8.58 percent;99. You are going to loan a friend $900 for one year;at a 5 percent rate of interest, compounded annually. How much additional;interest could you have earned if you had compounded the rate continuously;rather than annually?;A. $0.97;B. $1.14;C. $1.23;D. $1.36;E. $1.41;.14;100. You are borrowing money today at 8.48 percent;compounded annually. You will repay the principal plus all the interest in one;lump sum of $12,800 two years from today. How much are you borrowing?;A. $9,900.00;B. $10,211.16;C. $10,877.04;D. $11,401.16;E. $11,250.00;101. This morning, you borrowed $9,500 at 7.65 percent;annual interest. You are to repay the loan principal plus all of the loan;interest in one lump sum four years from today. How much will you have to;repay?;A. $12,757.92;B. $12,808.13;C. $12,911.89;D. $13,006.08;E. $13,441.20;102. On this date last year, you borrowed $3,400. You;have to repay the loan principal plus all of the interest six years from today.;The payment that is required at that time is $6,000. What is the interest rate;on this loan?;A. 8.01 percent;B. 8.45 percent;C. 8.78 percent;D. 9.47 percent;E. 9.93 percent;103. John's Auto Repair just took out an $89,000;10-year, 8 percent, interest-only loan from the bank. Payments are made;annually. What is the amount of the loan payment in year 10?;A. $7,120;B. $8,850;C. $13,264;D. $89,000;E. $96,120;104. On the day you entered college, you borrowed;$18,000 on an interest-only, four-year loan at 5.25 percent from your local;bank. Payments are to be paid annually. What is the amount of your loan payment;in year 2?;A. $945;B. $1,890;C. $3,600;D. $5,106;E. $6,250;105. On the day you entered college you borrowed;$25,000 from your local bank. The terms of the loan include an interest rate of;4.75 percent. The terms stipulate that the principal is due in full one year;after you graduate. Interest is to be paid annually at the end of each year.;Assume that you complete college in four years. How much total interest will;you pay on this loan?;A. $5,266.67;B. $5,400.00;C. $5,937.50;D. $6,529.00;E. $6,607.11;106. You just acquired a mortgage in the amount of;$249,500 at 6.75 percent interest, compounded monthly. Equal payments are to be;made at the end of each month for thirty years. How much of the first loan;payment is interest? (Assume each month is equal to 1/12 of a year.);A. $925.20;B. $1,206.16;C. $1,403.44;D. $1,511.21;E. $1,548.60;107. On June 1, you borrowed $212,000 to buy a house.;The mortgage rate is 8.25 percent. The loan is to be repaid in equal monthly;payments over 15 years. The first payment is due on July 1. How much of the;second payment applies to the principal balance? (Assume that each month is;equal to 1/12 of a year.);A. $603.32;B. $698.14;C. $1,358.56;D. $1,453.38;E. $2,056.70;108. This morning, you borrowed $150,000 to buy a;house. The mortgage rate is 7.35 percent. The loan is to be repaid in equal;monthly payments over 20 years. The first payment is due one month from today.;How much of the second payment applies to the principal balance? (Assume that;each month is equal to 1/12 of a year.);A. $268.84;B. $277.61;C. $917.06;D. $925.83;E. $1,194.67;Essay;Questions;109. Explain the difference between the effective;annual rate (EAR) and the annual percentage rate (APR). Of the two, which one;has the greater importance and why?;110. You are considering two annuities, both of which;pay a total of $20,000 over the life of the annuity. Annuity A pays $2,000 at;the end of each year for the next 10 years. Annuity B pays $1,000 at the end of;each year for the next 20 years. Which annuity has the greater value today? Is;there any circumstance where the two annuities would have equal values as of;today? Explain.;111. Why might a borrower select an interest-only loan;instead of an amortized loan, which would be cheaper?;4;112. Kristie owns a perpetuity which pays $12,000 at;the end of each year. She comes to you and offers to sell you all of the;payments to be received after the 10th year. Explain how you can;determine the value of this offer.;Multiple;Choice Questions;113. Western Bank offers you a $21,000, 6-year term loan;at 8 percent annual interest. What is the amount of your annual loan;payment?;A. $4,228.50;B. $4,542.62;C. $4,666.67;D. $4,901.18;E. $5,311.07;114. First Century Bank wants to earn an effective;annual return on its consumer loans of 10 percent per year. The bank uses daily;compounding on its loans. By law, what interest rate is the bank required to;report to potential borrowers?;A. 9.23 percent;B. 9.38 percent;C. 9.53 percent;D. 9.72 percent;E. 10.00 percent


Paper#51094 | Written in 18-Jul-2015

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