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##### Your firm intends to finance the purchase of a new construction crane. The cost is $1,500,000. What is the size of the first payment if the crane is financed with an interest-only loan at an annual rate of 8.50%?

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;;Question 1 of 40 2.5/ 2.5 Points;Your firm intends to finance the purchase of a new construction crane. The cost is $1,500,000. What is the size of the first payment if the crane is financed with an interest-only loan at an annual rate of 8.50%?;A. $228,611.56;B. $127,500;C. $3,391,475.16;D. There is not enough information to answer this question.;Question 2 of 40 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.;A. $3,265,823.60;B. $1,789,520.81;C. $1,664,670.52;D. There is not enough information to answer this question.;Question 3 of 40 2.5/ 2.5 Points;Your employer has agreed to place year-end deposits of $1,000, $2,000, and $3,000 into your retirement account. The $1,000 deposit will be one year from today, the $2,000 deposit two years from today, and the $3,000 deposit three years from today. If your account earns 5% per year, how much money will you have in the account at the end of Year 3 when the last deposit is made?;A. $5,357.95;B. $6,000;C. $6,202.50;D. $6,727.88;Question 4 of 40 0.0/ 2.5 Points;An annuity is a series of;A. variable cash payments at regular intervals across time.;B. equal cash payments at regular intervals across time.;C. variable cash payments at different intervals across time.;D. equal cash payments at different intervals across time.;Question 5 of 40 0.0/ 2.5 Points;What is the present value of a lottery paid as an annuity due for 20 years if the cash flows are $250,000 per year and the appropriate discount rate is 7.50%?;A. $5,000,000.00;B. $3,186,045.39;C. $2,739,769.55;D. $2,548,622.84;Question 6 of 40 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?;A. $100,000;B. $65,426.60;C. $62,311.05;D. $47,641.18;Question 7 of 40 0.0/ 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?;A. $66,505.81;B. $55,000.00;C. $196,694.12;D. $216,363.53;Question 8 of 40 0.0/ 2.5 Points;Your department at work places $10,000 every year-end into an account earning 5%. The money is used when the corporate office fails to fully finance your profitable projects. The money has not been touched since a deposit was made exactly five years ago. If the most recent deposit was made today, how much money is currently in the account?;A. $55,256.31;B. $60,000;C. $65,256.31;D. $68,019.13;Question 9 of 40 2.5/ 2.5 Points;A/An __________ is a series of equal end-of-the-period cash flows.;A. annuity;B. annuity due;C. perpetuity due;D. None of the above;Question 10 of 40 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?;A. $120,000.00;B. $777,169.56;C. $839,343.12;D. $2,606,942.58;Question 11 of 40 0.0/ 2.5 Points;You currently have $67,000 in an interest-earning account. From this account, you wish to make 20 year-end payments of $5,000 each. What annual rate of return must you make on this account to meet your objective?;A. 4.16%;B. 5.03%;C. 6.42%;D. 7.32%;Question 12 of 40 0.0/ 2.5 Points;Your company just sold a product with the following payment plan: $50,000 today, $25,000 next year, and $10,000 the following year. If your firm places the payments into an account earning 10% per year, how much money will be in the account after collecting the last payment?;A. $99,000;B. $98,000;C. $88,500;D. $85,000;Question 13 of 40 0.0/ 2.5 Points;Your parents have an investment portfolio of $400,000, and they wish to take out cash flows of $50,000 per year as an ordinary annuity. How long will their portfolio last if the portfolio is invested at an annual rate of 4.50%? Use a calculator to determine your answer.;A. 8 years;B. 9.10 years;C. 9.60 years;D. 10.14 years;Question 14 of 40 0.0/ 2.5 Points;When you pay off the principal and all of the interest at one time at the maturity date of the loan, we call this type of loan a(n);A. amortized loan.;B. interest-only loan.;C. discount loan.;D. compound loan.;Question 15 of 40 0.0/ 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;A. $38,955.39;B. $56,687.43;C. $42,074.42;D. $32,000;Question 16 of 40 0.0/ 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?;A. Amortized loan;B. Interest-only loan;C. Discount loan;D. Compound loan;Question 17 of 40 0.0/ 2.5 Points;The main variables of the TVM equation are;A. present value, future value, time, interest rate, and payment.;B. present value, future value, perpetuity, interest rate, and payment.;C. present value, future value, time, annuity, and interest rate.;D. present value, future value, perpetuity, interest rate, and principal.;Question 18 of 40 0.0/ 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?;A. $90,154.83;B. $93,761.02;C. $28,675.97;D. $32,117.08;Question 19 of 40 0.0/ 2.5 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. $3,000;C. $2,833.39;D. $2,673.01;Question 20 of 40 0.0/ 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 a discount loan?;A. $0;B. $6,000;C. $8,333.33;D. $12,161.29;Part 2 of 2 - Lesson 5 Questions17.5/ 50.0 Points;Question 21 of 40 0.0/ 2.5 Points;Suppose you deposit money in a certificate of deposit (CD) at a bank. Which of the following statements is true?;A. The bank is borrowing money from you without a promise to repay that money with interest.;B. The bank is lending money to you with a promise to repay that money with interest.;C. The bank is technically renting money from you with a promise to repay that money with interest.;D. The bank is lending money to you, but not borrowing money from you.;Question 22 of 40 0.0/ 2.5 Points;The phrase "price to rent money" is sometimes used to refer to;A. historical prices.;B. compound rates.;C. discount rates.;D. interest rates.;Question 23 of 40 0.0/ 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?;A. $800;B. $600;C. $400;D. $200;Question 24 of 40 2.5/ 2.5 Points;The number of periods for a consumer loan (n) is equal to the;A. number of years times compounding periods per year.;B. number of years.;C. number of years in a period.;D. number of compounding periods.;Question 25 of 40 0.0/ 2.5 Points;When interest rates are stated or given for loan repayments, it is assumed that they are __________ unless specifically stated otherwise.;A. daily rates;B. annual percentage rates;C. effective annual rates;D. APYs;Question 26 of 40 0.0/ 2.5 Points;As applied to mortgage loans, which of the following statements is FALSE?;A. Advertised rates are annual percentage rates.;B. A spreadsheet uses the periodic interest rate, not the annual percentage rate.;C. By increasing the number of payments per year you increase your effective borrowing rate.;D. A mortgage problem is unlike a future value problem with an annuity.;Question 27 of 40 0.0/ 2.5 Points;The Fisher Effect involves which of the items below?;A. Nominal rate, the real rate, and inflation;B. Nominal rate and the real rate only;C. Nominal rate and inflation only;D. Nominal rate, the bond rate, and inflation;Question 28 of 40 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;A. you will be able to consume fewer goods.;B. you will be able to buy the same amount of goods or services.;C. you will be able to buy fewer goods or services.;D. you will be able to buy more goods or services.;Question 29 of 40 2.5/ 2.5 Points;Which of the following statements is true if you increase your monthly payment above the required loan payment?;A. The extra portion of the payment does not go to the principal.;B. You can significantly increase the number of payments needed to pay off the loan.;C. The extra portion of the payment increases the principal.;D. You can significantly reduce the number of payments needed to pay off the loan.;Question 30 of 40 0.0/ 2.5 Points;The two major components of the interest rate that cause rates to vary across different investment opportunities or loans are;A. the default premium and the bankruptcy premium.;B. the liquidity premium and the maturity premium.;C. the default premium and the maturity premium.;D. the inflation premium and the maturity premium.;Question 31 of 40 0.0/ 2.5 Points;If you take out a loan from a bank, you will be charged;A. for principal but not interest.;B. for interest but not principal.;C. for both principal and interest.;D. for interest only.;Question 32 of 40 0.0/ 2.5 Points

Paper#78708 | Written in 18-Jul-2015

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