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##### Chapter 02 Determinants of Interest Rates

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Question;Multiple Choice Questions;21. An investment pays \$400 in one year, X amount of;dollars in two years, and \$500 in 3 years. The total present value of all the;cash flows (including X) is equal to \$1500. If i is 6%, what is X?;A. \$702.83;B. \$822.41;C. \$789.70;D. \$749.67;E. \$600.00;22. An insurance company is trying to sell you a;retirement annuity. The annuity will give you 20 payments with the first;payment in 12 years when you retire. The insurance firm is asking you to pay;\$50,000 today. If this is a fair deal, what must the payment amount be (to the;dollar) if the interest rate is 8%?;A. \$5,093;B. \$12,824;C. \$9,472;D. \$11,874;E. \$10,422;23. You borrow \$95 today for six and a half weeks. You;must repay \$100 at loan maturity. What is the effective annual rate on this;loan?;A. 50.73%;B. 40.00%;C. 32.33%;D. 27.95%;E. 37.93%;24. If M > 1 and you solve the following equation;to find i: PV * (1 + (i/M))M*N= FV, the i you get will be;A. the bond equivalent yield;B. the EAR;C. the TOE;D. the EYE;E. the rate per compounding period;25. An annuity and an annuity due with the same number;of payments have the same future value if r = 10%. Which one has the higher;payment?;A. They both must have the same payment since the future values are the;same;B. There is no way to tell which has the higher payment;C. An annuity and an annuity due cannot have the same future value;D. The annuity has the higher payment;E. The annuity due has the higher payment;26. You go to the Wall Street Journal and;notice that yields on almost all corporate and Treasury bonds have decreased.;The yield decreases may be explained by which one of the following;A. a decrease in U.S. inflationary expectations;B. newly expected decline in the value of the dollar;C. an increase in current and expected future returns of real corporate;investments;D. decreased Japanese purchases of U.S. Treasury Bills/Bonds;E. increases in the U.S. government budget deficit

Paper#55103 | Written in 18-Jul-2015

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