Finance 303 - Financial Management » Spring 2023 » Quiz 3
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Question #1
You want to buy a new sports car 3 years from now, and you plan to save $4,200 per year, beginning one year from today. You will deposit your savings in an account that pays 5.2% interest. How much will you have just after you make the 3rd deposit, 3 years from now?
A.
$11,973
B.
$13,930
C.
$12,603
D.
$13,267
Question #2
Sue now has $320. How much would she have after 8 years if she leaves it invested at 8.5% with annual compounding?
A.
$510.11
B.
$731.37
C.
$614.59
D.
$590.01
Question #3
What is the present value of the following cash flow stream at a rate of 12.00%? Years: 0 1 2 3 4 CFs: $0 $75 $225 $0 $300
A.
$436.99
B.
$441.36
C.
$402.03
D.
$511.28
Question #4
Your friend just won the Florida lottery. She has the choice of $15,000,000 today or a 20-year annuity of $1,050,000, with the first payment coming one year from today. What rate of return is built into the annuity?
A.
4.58%
B.
4.17%
C.
3.79%
D.
3.44%
Question #5
Master Card and other credit card issuers must by law print the Annual Percentage Rate (APR) on their statements. If the APR is stated to be 20%, with interest compounded daily (365 days in a year), what is the card's effective annual interest rate?
A.
21%
B.
22.1%
C.
23.3%
D.
21.4%
Question #6
Which of the following statements is CORRECT?
A.
The cash flows for an ordinary (or deferred) annuity all occur at the beginning of the periods.
B.
The cash flows for an annuity must all be equal, and they must occur at regular intervals, such as once a year or once a month.
C.
If a series of unequal cash flows occurs at regular intervals, such as once a year, then the series is by definition an annuity.
D.
The cash flows for an annuity due must all occur at the ends of the periods.
Question #7
Your bank account pays an 6% nominal rate of interest. The interest is compounded quarterly. Which of the following statements is CORRECT?
A.
The periodic rate of interest is 1.5% and the effective rate of interest is greater than 6%.
B.
The periodic rate of interest is 6% and the effective rate of interest is also 6%.
C.
The periodic rate of interest is 6% and the effective rate of interest is greater than 6%.
D.
The periodic rate of interest is 1.5% and the effective rate of interest is 3%.
Question #8
A U.S. Treasury bond will pay a lump sum of $1,000 exactly 3 years from today. The nominal interest rate is 6%, semiannual compounding. Which of the following statements is CORRECT?
A.
The periodic rate is less than 3%.
B.
The periodic interest rate is greater than 3%.
C.
The present value would be greater if the lump sum were discounted back for more periods.
D.
The present value of the $1,000 would be smaller if interest were compounded monthly rather than semiannually.
Question #9
At a rate of 10.0%, what is the future value of the following cash flow stream? Years: 0 1 2 3 4 CFs: $0 $75 $225 $0 $300
A.
$746
B.
$544
C.
$672
D.
$820
Question #10
Suppose you are buying your first condo for $160,000, and you will make a $15,000 down payment. You have arranged to finance the remainder with a 30-year, monthly payment, amortized mortgage at a 6.5% nominal interest rate, with the first payment due in one month. What will your monthly payments be?
A.
$925.66
B.
$971.49
C.
$916.50
D.
$962.32
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