FIN Unit 2 QUIZ

If you put $8,000 in a savings account today, how much will it grow to in 3 years if the bank pays 6% annual interest compounded continuously?

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$8,494.69

 

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$9,440.00

 

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$9,528.12

 

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$9,577.74

 

A company issues zero coupon bonds which mature in 30 years. These bonds can be bought for $99.38 and then pay no annual interest payments, only $1000 at maturity. What is the annual percentage cost of these bonds to the issuing company?

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30%

 

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17%

 

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12%

 

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8%

 

If you can invest $10,000 at a 7% annual rate, compounded monthly, how long will it take to have $13,050?

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19 months

 

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52 months

 

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16 months

 

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46 months

 

Which of the following statements is not true ?

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The present value factor is also known as the discount factor.

 

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The present value factor decreases as the interest rate increases.

 

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The present value factor is the reciprocal of the future value factor.

 

[removed]The present value factor can be greater than 1.  Aaron earns 10% interest compounded annually on his savings. He will deposit $750 today, $825 one year from today, and $910 two years from today. What will be the account balance three years from today?

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$3006.50

 

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$2,486.00

 

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$2,642.50

 

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$2,997.50

 

 

 

The amount borrowed on a loan equals the

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compounded value of the loan payments

 

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sum of the loan payments

 

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discounted value of the loan payments

 

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future value of the loan payments

 

 

Which of the following examples represents a growing annuity?

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A 30-year mortgage.

 

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A share of preferred stock.

 

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A consol.

 

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An inflation-adjusted 25-year lease.

 

The EAR will equal the APR if interest is compounded

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daily.

 

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monthly.

 

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quarterly.

 

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annually.

Which of the following is not a typical way in which interest rates are quoted in the marketplace?

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APR.

 

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EAR.

 

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Discounted interest.

 

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The quoted interest rate.

 

 

Which of the following interest rates will result in the highest amount of interest being charged?

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7% per year, compounded daily.

 

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7.5% per year, compounded quarterly.

 

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8% per year, compounded annually.

 

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7.8% per year, compounded daily.

 

 

 

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