Question 1

What annual payment must you receive in order to earn a 6.5% rate of return on a perpetuity that has a cost of $2,600?

Accepted Answer

A)  $190.97 
B)  $143.65 
C)  $163.93 
D)  $148.72 
E)  $169.00 
A)  $190.97 
B)  $143.65 
C)  $163.93 
D)  $148.72 
E)  $169.00

Question 2

You plan to borrow $39,000 at a 7.5% annual interest rate.The terms require you to amortize the loan with 7 equal end-of-year payments.How much interest would you be paying in Year 2?

Accepted Answer

A)  $2,073.71 
B)  $2,332.92 
C)  $2,462.53 
D)  $2,592.13 
E)  $2,980.95 
A)  $2,073.71 
B)  $2,332.92 
C)  $2,462.53 
D)  $2,592.13 
E)  $2,980.95

Question 3

Riverside Bank offers to lend you $50,000 at a nominal rate of 6.5%,compounded monthly.The loan (principal plus interest)must be repaid at the end of the year.Midwest Bank also offers to lend you the $50,000,but it will charge an annual rate of 6.2%,with no interest due until the end of the year.How much higher or lower is the effective annual rate charged by Midwest versus the rate charged by Riverside?

Accepted Answer

A)  -0.55% 
B)  -0.41% 
C)  -0.50% 
D)  -0.62% 
E)  -0.51% 
A)  -0.55% 
B)  -0.41% 
C)  -0.50% 
D)  -0.62% 
E)  -0.51%

Question 4

If a bank compounds savings accounts quarterly,the effective annual rate will exceed the nominal rate.

Accepted Answer

A) True 
 B)False

What annual payment must you receive in order to earn a 6.5% rate of return on a perpetuity that has a cost of $2,600?

You plan to borrow $39,000 at a 7.5% annual interest rate.The terms require you to amortize the loan with 7 equal end-of-year payments.How much interest would you be paying in Year 2?

If a bank compounds savings accounts quarterly,the effective annual rate will exceed the nominal rate.

An Overview of Financial Management

Financial Markets and Institutions

Financial Statements,cash Flow and Taxes

Analysis of Financial Statements

A Continuous-Compounding-And-Discounting

Interest Rates

Bonds and Their Valuation

Risk and Rates of Return

Stocks and Their Valuation

The Cost of Capital

The Basics of Capital Budgeting

Cash Flow Estimation and Risk Analysis

Capital Structure and Leverage

Distributions to Shareholders: Dividends and Share Repurchases

Working Capital Management

Financial Planning and Forecasting

Multinational Financial Management

Zero-Coupon-Bonds

Bankruptcy and Reorganization

Calculating Beta Coefficients

Using the CAPM to Estimate the Risk-Adjusted Cost of Capital

Techniques for Measuring Beta Risk

Comparing Mutually Exclusive Projects with Unequal Lives

Degree of Leverage

Filters

Exam 5: Time Value of Money

What annual payment must you receive in order to earn a 6.5% rate of return on a perpetuity that has a cost of $2,600?

You plan to borrow $39,000 at a 7.5% annual interest rate.The terms require you to amortize the loan with 7 equal end-of-year payments.How much interest would you be paying in Year 2?

If a bank compounds savings accounts quarterly,the effective annual rate will exceed the nominal rate.

An Overview of Financial Management

Financial Markets and Institutions

Financial Statements,cash Flow and Taxes

Analysis of Financial Statements

A Continuous-Compounding-And-Discounting

Interest Rates

Bonds and Their Valuation

Risk and Rates of Return

Stocks and Their Valuation

The Cost of Capital

The Basics of Capital Budgeting

Cash Flow Estimation and Risk Analysis

Capital Structure and Leverage

Distributions to Shareholders: Dividends and Share Repurchases

Working Capital Management

Financial Planning and Forecasting

Multinational Financial Management

Zero-Coupon-Bonds

Bankruptcy and Reorganization

Calculating Beta Coefficients

Using the CAPM to Estimate the Risk-Adjusted Cost of Capital

Techniques for Measuring Beta Risk

Comparing Mutually Exclusive Projects with Unequal Lives

Degree of Leverage

Filters