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10 MCQ The annual payment on a $1,000 loan

Apr 27th, 2014
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  1.  
  2. Download: http://solutionzip.com/downloads/10-mcq-the-annual-payment-on-a-1000-loan/
  3. 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:
  4. (a) $684.58
  5. (b) $784.58 – simple test, 1000*.1=100 interest, add to 1000 prin., subtract 315.42 pymt.
  6. (c) $884.58
  7. (d) $1,100
  8. 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:
  9. (a) 20%
  10. (b) 14%
  11. (c) 10% – fv(100,000 at 10% for ten years equals approx. 250,000. 10% is 25,000 per year.
  12. (d) 6%
  13. 3. You are making $1,000 monthly deposits into a fund that pays interest at a rate of
  14. 6% compounded monthly. What would be the balance at the end of 10 years?
  15. (a) $163,879 = fv of an annuity, 120 monthly pmts, 6/12 monthly interest, $1000 pd monthly.
  16. (b) $158,169
  17. (c) $127,200
  18. (d) $159,423
  19. 4. You borrow $20,000 from a bank to be repaid in monthly installments for 3 years
  20. at 9% interest compounded monthly. What is the portion of interest payment for
  21. the 18th payment?
  22. (a) $150
  23. (b) $88.28
  24. (c) $80.04
  25. (d) $84.17 did amortization schedule. 20,000, 9%, 36 pymts.
  26. 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?
  27. (a)$267
  28. (b)$309 = pmt(.06/12, 60,16000)
  29. (c)$347
  30. (d)$389
  31. 6. How many years will it take for the dollar’s purchasing power to be one-half what
  32. it is now, if the general inflation rate is expected to continue at the rate of 6% for
  33. an indefinite period?
  34. (a) About 7 years
  35. (b) About 8 years
  36. (c) About 11 years
  37. (d) About 12 years = 1/1.06, then multiply each succeeding year by 1/1.06, 12 years gets it to $.4969
  38. 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:
  39. (a) 0 = -1000 + 500(P/F,i,3) + 1500(P/F,i,5)
  40. (b) 0 = 1000 + 500(P/F, i, 3) + 1500 (P/F, i, 5)
  41. (c) 1000 = -500(P/F,i,3) – 1500(P/F, i,5)
  42. (d) -1000= 500(P/F,i,3) + 1500 (P/F,i,5)
  43. 8. Consider the following project balance profiles for proposed investment projects.
  44. Project Balances
  45. N Project A Project B Project C
  46. 0 -$600 -$500 -$200
  47. 1 200 300 0
  48. 2 300 650 150
  49. NPW - $416 -
  50. Rate Used 15% ? -
  51. Statement 1—For Project A, the cash flow at the end of year 2 is $100
  52. Statement 2—For Project C, its net future worth at the end of year 2 is $150
  53. Statement 3—For Project B, the interest rate used is 25%
  54. Statement 4—For Project A, the rate of return should be greater than 15%
  55. Which of the statement(s) above is (are) correct?
  56. (a) Just Statements 1 and 2
  57. (b) Just Statements 2 and 3 statements 1 and 4 are incorrect. A has a negative return. Choice b is the only possible answer.
  58. (c) Just Statements 1 and 3
  59. (d) Just Statements 2, 3 and 4
  60. 9. A couple wants to save for their daughter’s college expenses. The daughter will
  61. enter college 8 years from now and she will need $40,000, $41,000, $42,000 and
  62. $43,000 in actual dollars for 4 school years. Assume that these college payments
  63. will be made at the beginning of the school year. The future general inflation rate
  64. is estimated to be 6% per year and the annual inflation-free interest rate is 5%.
  65. What is the equal amount, in actual dollars, the couple must save each year until
  66. their daughter goes to college?
  67. (a) $11,838 : NPV of 11838 annuity at 11% for eight years equals the NPV of the payment stream at 11%.
  68. (b) $11,945
  69. (c) $12,142
  70. (d) $12,538
  71. 10. What annual investment is required at 8% per year compounded annually to accumulate to
  72. $100,000 at the end of 20 years?
  73. (a) $1400
  74. (b) $2100
  75. (c) $2200 = pv of an annuity of $2,185.22 for 20 years at 8%.
  76. (d) $5400
  77.  
  78. Download: http://solutionzip.com/downloads/10-mcq-the-annual-payment-on-a-1000-loan/
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