Finance

1. Which of the following statements is most correct? (Points : 1)

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MultipleChoice

1

2. Why is the present value of an amount to be received (paid) in the future less than the future amount? (Points : 1)

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MultipleChoice

2

3. Suppose someone offered you your choice of two equally risky annuities, each paying $5,000 per year for 5 years. One is an annuity due, while the other is a regular (or deferred) annuity. If you are a rational wealth-maximizing investor which annuity would you choose? (Points : 1)

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MultipleChoice

3

4. Which of the following statements is correct? (Points : 1)

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MultipleChoice

4

5. Alice's investment advisor is trying to convince her to purchase an investment that pays $250 per year. The investment has no maturity; therefore the $250 payment will continue every year forever. Alice has determined that her required rate of return for such an investment should be 14 percent and that she would hold the investment for 10 years and then sell it. If Alice decides to buy the investment, she would receive the first $250 payment one year from today. How much should Alice be willing to pay for this investment? (Points : 1)

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MultipleChoice

5

6. A recent advertisement in the financial section of a magazine carried the following claim: "Invest your money with us at 14 percent, compounded annually, and we guarantee to double your money sooner than you imagine." Ignoring taxes, how long would it take to double your money at a simple rate of 14 percent, compounded annually? (Points : 1)

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MultipleChoice

6

7. You deposited $1,000 in a savings account that pays 8 percent interest, compounded quarterly, planning to use it to finish your last year in college. Eighteen months later, you decide to go to the Rocky Mountains to become a ski instructor rather than continue in school, so you close out your account. How much money will you receive? (Points : 1)

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MultipleChoice

7

8. If a 5-year regular annuity has a present value of $1,000, and if the interest rate is 10 percent, what is the amount of each annuity payment? (Points : 1)

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MultipleChoice

8

9. At an inflation rate of 9 percent, the purchasing power of $1 would be cut in half in 8.04 years. How long to the nearest year would it take the purchasing power of $1 to be cut in half if the inflation rate were only 4%? (Points : 1)

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MultipleChoice

9

10. Assume that you can invest to earn a stated annual rate of return of 12 percent, but where interest is compounded semiannually. If you make 20 consecutive semiannual deposits of $500 each, with the first deposit being made today, what will your balance be at the end of Year 20? (Points : 1)

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1447714439

MultipleChoice

10