Quiz 2 with Answers - Financial Management | FINA 3000, Quizzes of Finance

Download Quiz 2 with Answers - Financial Management | FINA 3000 and more Quizzes Finance in PDF only on Docsity! FNA 3OAO Circle 8:00 or F*" r; ullowed a non programmable calculator. HP l0B, TI BA II plus, Hp l2C - No Calculator with p;,rust.turn in your quiz and scantron sheet at the end of the period. Students who do not tum in the quiz lcd from their grade. Choose the BEST answer to each question. Choose the closest numerical answer ifyour k/- a L5> r Quiz 2 spring 20iJ You have 50 minutes text will be allowed in any . when requested may have pointd number is not exact. A) II and III only B) II, III, and IV only - C) ^1,-II; and IV only D) III only Elelv II. Future valug iffier e t fetorrue€rcaftnlfd?fuTE. III. Present value interest factors are greater than firture'value inferest factors. IV. Present value interest factors grow as t grows, provided r is held constant. II and III only I and IV only II and IV only I and II only I only The interdt rate charged per period multiplied b! the number of periods per year is called the: Daily interest rate. Effective annual rate (EAR)., Annual percentage rate (APR). Periodic interest rate. Compound interest rate. 3. You are choosing between investrnents offered by two different banks. One promises a return of l0olo for three years using simple interest while the otfier offers a retum of l}%ofor three years using compognd interest. you should: @.B)-ehoese*be-compoundifie 5,000. C)'-ehoose"the'simple*interestoption-becauso-both-havethesame.basieinterssrrarct'- D) Choose the compound interest option because it provides a higher retum.F)_fh ou@. 4. You are trying to compare the desirability of two altemative investments with rates of refurn quoted using different compounding periods. To make the proper decision, you should: A) B) Convert each quoted retum to a monthly nominal rate. C) Convert each quoted retum to an APR D) Convert each quoted return to an annual nominal rate..fP) Convert each quoted return to an effective annual rate., 5. Youaregoingtoinvest$500attheendofeach,yearfortenyears.Givenaninterestrate,ybucanfindthepresent valu,e of t}is investment by: i..L.,-tddilq se cash flows together and finding the present value of the sum using the appropriate present value factor. , '{l:,1! '{nnlftne tlre proper present value factor to each cash flow, then adding up these pieient valuis. IIl. Finding the future value of each cash flow, adding all of the future valuei together, then finding the discounted' . present value of this future value sum. IV. Finding the future value of the entire payment stream., A) B) c) D) E) 2. A) B) c) D) E) 4=(O r/t:Y 7 .b Page I ?(-- What is the total present value of$80 received in one year, $300 received in two years, and $700 received in six years ifthe discount rate isTo/o? $852.83 $803.24 $772.39 ss82.72 8757.25 What is the future value at the end of year 4of the following set of cash flows? Assume an interest rur" of tOX. 12 $800 -$800 r1 ^ +qLve-u\ t e.vI tzo .v57 What is the effective airnual rate of 60Z compounded quarterly? G ''blr' -L 9. You are going to wilhdraw $5,000 at the end ofeach year for the next four years frbm an account that pays interest at a rate of 9Yo compounded annually. How much must there be in the account today in order for the account to reduce to a balance of zero after the last withdrawal? A) 819,448.26 B) $20,000.00 c) s14,793.83 D) $16,198.60 E) $18,602.2e ,l .KiO.-l"order to help you through college, your parents just deposited $20,000 into a bank account paying6%ointereit,4l-}(- Starting tomorrow, you plan to withdraw equal amounts from the account at the beginning of each of the next four \l . years. What is the MOST you can withdraw annually? li A) $6,t0t.88 B) $6,395.88 c) $5,445.12 D) $5,771.83 r/H = l0 n -- zLlo p& = -2000 $l- 0 ?v'i" youworkforwilldeposit$150-attheendofeachmonthintoyourretirementtund.Interestis Iqq(625'O(01 monthly. You plan to retire 25 years from now and estimate that you will need $2,000 per month out tif tFe account for the ensuing 20 years. Ifthe account pays l0% compounded monthly, how much do you need to put into the account each month, in addition to your company's deposit, in order to meet your objective? 34 $800 -$800 6. A) B) c) D) E) 7. A) B) c) D) E) 8. A) B) c) D) E) Year Cash Flow $ 129.39 5 196.42 $ 0.00 $ 120.76 $ r76.80 izc 7 57 6.O0Yo 24.00% 8.24% " 8.00% 6.l4Yo lcci 12. A) B) c) D) E) fl 3"i13 'L0 tobo c) $ 34.3r D) $ 0.00; the Lompany's deposit fully funds your retirements objective E) $ 21.96 A bond with a face value of $1,000 that sells for more than $1,000 in the market is called a: Discount bond. Zero coupon bond. Par bond. Floating ratdbond. Premium bond. -j '-' \ ^!1-'-,*'J LlgO, OOO \4= 3C]C) t['l = ,cns33 p^1_ -- -t960 ,L{r",t61z,Bs qcT , ,11ri \ ut /\1,, \ ' tlv PageZ