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- Download: http://solutionzip.com/downloads/10-mcq-the-annual-payment-on-a-1000-loan/
- 1. The annual payment on a $1,000 loan over a four year period at 10% per year interest is $315.42. The balance immediately after the first payment has been made is nearest to:
- (a) $684.58
- (b) $784.58 – simple test, 1000*.1=100 interest, add to 1000 prin., subtract 315.42 pymt.
- (c) $884.58
- (d) $1,100
- 2. A permanent scholarship fund is started through a donation of $100,000. If five scholarships of $5,000 are awarded each year beginning ten years from now, the rate of return for the invested money is nearest to:
- (a) 20%
- (b) 14%
- (c) 10% – fv(100,000 at 10% for ten years equals approx. 250,000. 10% is 25,000 per year.
- (d) 6%
- 3. You are making $1,000 monthly deposits into a fund that pays interest at a rate of
- 6% compounded monthly. What would be the balance at the end of 10 years?
- (a) $163,879 = fv of an annuity, 120 monthly pmts, 6/12 monthly interest, $1000 pd monthly.
- (b) $158,169
- (c) $127,200
- (d) $159,423
- 4. You borrow $20,000 from a bank to be repaid in monthly installments for 3 years
- at 9% interest compounded monthly. What is the portion of interest payment for
- the 18th payment?
- (a) $150
- (b) $88.28
- (c) $80.04
- (d) $84.17 did amortization schedule. 20,000, 9%, 36 pymts.
- 5. You are buying your first car and need to borrow $16,000 over 5 years. If interest is 6%, what are your monthly payments?
- (a)$267
- (b)$309 = pmt(.06/12, 60,16000)
- (c)$347
- (d)$389
- 6. How many years will it take for the dollar’s purchasing power to be one-half what
- it is now, if the general inflation rate is expected to continue at the rate of 6% for
- an indefinite period?
- (a) About 7 years
- (b) About 8 years
- (c) About 11 years
- (d) About 12 years = 1/1.06, then multiply each succeeding year by 1/1.06, 12 years gets it to $.4969
- 7. If you deposit $1,000 now and are promised payments of $500 three years from now and $1500 five years from now, the equation that will yield the correct rate of return is:
- (a) 0 = -1000 + 500(P/F,i,3) + 1500(P/F,i,5)
- (b) 0 = 1000 + 500(P/F, i, 3) + 1500 (P/F, i, 5)
- (c) 1000 = -500(P/F,i,3) – 1500(P/F, i,5)
- (d) -1000= 500(P/F,i,3) + 1500 (P/F,i,5)
- 8. Consider the following project balance profiles for proposed investment projects.
- Project Balances
- N Project A Project B Project C
- 0 -$600 -$500 -$200
- 1 200 300 0
- 2 300 650 150
- NPW - $416 -
- Rate Used 15% ? -
- Statement 1—For Project A, the cash flow at the end of year 2 is $100
- Statement 2—For Project C, its net future worth at the end of year 2 is $150
- Statement 3—For Project B, the interest rate used is 25%
- Statement 4—For Project A, the rate of return should be greater than 15%
- Which of the statement(s) above is (are) correct?
- (a) Just Statements 1 and 2
- (b) Just Statements 2 and 3 statements 1 and 4 are incorrect. A has a negative return. Choice b is the only possible answer.
- (c) Just Statements 1 and 3
- (d) Just Statements 2, 3 and 4
- 9. A couple wants to save for their daughter’s college expenses. The daughter will
- enter college 8 years from now and she will need $40,000, $41,000, $42,000 and
- $43,000 in actual dollars for 4 school years. Assume that these college payments
- will be made at the beginning of the school year. The future general inflation rate
- is estimated to be 6% per year and the annual inflation-free interest rate is 5%.
- What is the equal amount, in actual dollars, the couple must save each year until
- their daughter goes to college?
- (a) $11,838 : NPV of 11838 annuity at 11% for eight years equals the NPV of the payment stream at 11%.
- (b) $11,945
- (c) $12,142
- (d) $12,538
- 10. What annual investment is required at 8% per year compounded annually to accumulate to
- $100,000 at the end of 20 years?
- (a) $1400
- (b) $2100
- (c) $2200 = pv of an annuity of $2,185.22 for 20 years at 8%.
- (d) $5400
- Download: http://solutionzip.com/downloads/10-mcq-the-annual-payment-on-a-1000-loan/
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