Question 1

If the current yield on 180-day Treasury notes is 6.42% per annum,what price per $100 of face value would an investor pay to purchase them?

Accepted Answer

A)  $75.95 
B)  $96.93 
C)  $96.94 
D)  $99.98

Question 2

What is the current price of a financial security that pays a fixed coupon of 10.2% per annum per $100 face value,compounding half-yearly and maturing in four years,when current yields in the market are 8.6% per annum?

Accepted Answer

A)  $103.9575 
B)  $70.3185 
C)  $103.887 
D)  $132.8295

Question 3

An investor plans to save $1000 per year for the next ten years as a retirement fund,and expects to earn 8.4% per annum,compounded monthly over the period,on all invested funds.How much will the investor have at the end of ten years?

Accepted Answer

A)  $187 085.48 
B)  $296 035.24 
C)  $126 882.77 
D)  $153 178.10

Question 4

You are considering an investment that will pay a lump sum of $50 000 at the end of six years and you decide that 9% per annum compounded monthly is an appropriate discount factor.What is the value of the investment in today's dollar terms?

Accepted Answer

A)  $31 508.48 
B)  $32 496.57 
C)  $31 934.98 
D)  $47 846.89

Question 5

If an investor purchases a commercial bill with a face value of $100 000 with a yield of 7.00% per annum and then,in 60 days,sells it at a yield of 6.70% per annum,the investor will make a capital loss on the sale of the bill.

Accepted Answer

A) True 
 B)False

Question 6

If you borrow $11 000 for four years at an annually compounding rate of 8.2% per annum,what is the total interest on the loan if the interest due is added to the principal over the period and repaid at the maturity date?

Accepted Answer

A)  $2933.96 
B)  $3608.00 
C)  $3842.51 
D)  $4076.54

Question 7

If you invest $12 000 for 4.75 years at 7.88% per annum,with interest compounded monthly,what will your total investment be worth at the end of the period?

Accepted Answer

A)  $12 378.94 
B)  $15 476.29 
C)  $16 232.40 
D)  $17 426.34

Question 8

Calculate the effective annual interest rate corresponding to 9.6% per annum,compounded monthly.

Accepted Answer

A)  10.03% 
B)  9.6% 
C)  8.0% 
D)  6.9%

Question 9

If you make an investment and agree to pay regular monthly payments of $450 at the end of the next twelve months,starting one month from today,what is the present value of this investment if the interest rate is 8.4% per annum compounded monthly?

Accepted Answer

A)  $3322.06 
B)  $4916.30 
C)  $5162.12 
D)  $5198.25

Question 10

The market convention to use a 360-day year in the financial markets applies in:

Accepted Answer

A)  the United Kingdom. 
B)  Australia. 
C)  the United Kingdom and euromarkets. 
D)  the United States and euromarkets.

Question 11

The idea of compound interest refers to:

Accepted Answer

A)  the payment of interest on previously earned interest. 
B)  investing for multiple periods in one year. 
C)  earning interest only on the initial investment. 
D)  changing interest rates during an investment.

Question 12

In relation to interest rates,explain what a yield is.

Accepted Answer

The answer of In relation to interest rates,explain what a...

Question 13

What is the present value of $1 million payable in 90 days at 8.00% per annum simple interest?

Accepted Answer

A)  $835 240.27 
B)  $974 372.66 
C)  $980 655.56 
D)  $1 002 747.25

Question 14

Calculate the effective annual interest rate if you are quoted 8% per annum,compounded every three months.

Accepted Answer

A)  11.10% 
B)  8.24% 
C)  8.22% 
D)  8.00%

Question 15

A finite stream of regular cash flows over a given period is known as a/an:

Accepted Answer

A)  perpetuity. 
B)  annuity. 
C)  debenture. 
D)  allowance.

Question 16

What is the current price of an existing debenture with a face value of $1000 that pays a fixed coupon of 8.4% per annum,compounded annually,and maturing in five years? Current yields in the market are 6.6% per annum.

Accepted Answer

A)  $941.65 
B)  $999.96 
C)  $1016.26 
D)  $1049.54

Question 17

The euromarkets,unlike those of the US,follow the market convention that a per-annum rate relates to a 365-day year.

Accepted Answer

A) True 
 B)False

Question 18

Calculate the effective annual interest rate if you are quoted 8% per annum,compounded half yearly.

Accepted Answer

A)  8.27% 
B)  8.16% 
C)  8.0% 
D)  4.0%

Question 19

If you receive $100 000 back as principal and interest at the end of the year for an initial investment of $93 456 at the start of the year,what interest has been earned on your investment?

Accepted Answer

A)  6.54% 
B)  65.4% 
C)  7.00% 
D)  70.00%

Question 20

If you invest _______ to earn simple interest of 6.8% per year,you will receive $12 375 at the end of two years.

Accepted Answer

A)  $4759.62 
B)  $5156.25 
C)  $9728.77 
D)  $10 893.49

Exam 8: Mathematics of Finance: An Introduction to Basic Concepts and Calculations

If the current yield on 180-day Treasury notes is 6.42% per annum,what price per $100 of face value would an investor pay to purchase them?

What is the current price of a financial security that pays a fixed coupon of 10.2% per annum per $100 face value,compounding half-yearly and maturing in four years,when current yields in the market are 8.6% per annum?

An investor plans to save $1000 per year for the next ten years as a retirement fund,and expects to earn 8.4% per annum,compounded monthly over the period,on all invested funds.How much will the investor have at the end of ten years?

You are considering an investment that will pay a lump sum of $50 000 at the end of six years and you decide that 9% per annum compounded monthly is an appropriate discount factor.What is the value of the investment in today's dollar terms?

If an investor purchases a commercial bill with a face value of $100 000 with a yield of 7.00% per annum and then,in 60 days,sells it at a yield of 6.70% per annum,the investor will make a capital loss on the sale of the bill.

If you borrow $11 000 for four years at an annually compounding rate of 8.2% per annum,what is the total interest on the loan if the interest due is added to the principal over the period and repaid at the maturity date?

If you invest $12 000 for 4.75 years at 7.88% per annum,with interest compounded monthly,what will your total investment be worth at the end of the period?

Calculate the effective annual interest rate corresponding to 9.6% per annum,compounded monthly.

If you make an investment and agree to pay regular monthly payments of $450 at the end of the next twelve months,starting one month from today,what is the present value of this investment if the interest rate is 8.4% per annum compounded monthly?

The market convention to use a 360-day year in the financial markets applies in:

The idea of compound interest refers to:

In relation to interest rates,explain what a yield is.

What is the present value of $1 million payable in 90 days at 8.00% per annum simple interest?

Calculate the effective annual interest rate if you are quoted 8% per annum,compounded every three months.

A finite stream of regular cash flows over a given period is known as a/an:

What is the current price of an existing debenture with a face value of $1000 that pays a fixed coupon of 8.4% per annum,compounded annually,and maturing in five years? Current yields in the market are 6.6% per annum.

The euromarkets,unlike those of the US,follow the market convention that a per-annum rate relates to a 365-day year.

Calculate the effective annual interest rate if you are quoted 8% per annum,compounded half yearly.

If you receive $100 000 back as principal and interest at the end of the year for an initial investment of $93 456 at the start of the year,what interest has been earned on your investment?

If you invest _______ to earn simple interest of 6.8% per year,you will receive $12 375 at the end of two years.