Quiz 2

You expect to receive $9,500 in 6 years from a lawsuit settlement. What is the present value of the settlement? Use an annual interest rate of 7.75%.

a. $5,518

b. $6,070

c. $6,251

d. $6,290

e. $6,571

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2. (Points: 1)

What is the monthly payment on a $460,000 mortgage? Assume a standard 30-year, 6.8% mortgage with monthly payments.

a. $2,822

b. $2,955

c. $2,998

d. $3,068

e. $3,190

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3. (Points: 1)

You just won the lottery, which promises you $200,000 per year for the next 20 years. You receive the first payment today (hint: annuity due). If your discount rate is 9.25%, what is the present value of your winnings?

a. $1,774,025

b. $1,793,643

c. $1,885,159

d. $1,959,555

e. $2,038,975

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4. (Points: 1)

You just paid $925 for a security that claims it will pay you $2,175 in 9 years. What is your annual rate of return?

a. 9.10%

b. 9.20%

c. 9.97%

d. 10.14%

e. 10.53%

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5. (Points: 1)

You just deposited $9,000 in an account. What is the future value in 9 years? Use a nominal rate (monthly compounding) of 8.00%.

a. $16,833

b. $18,190

c. $18,446

d. $18,678

e. $19,623

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6. (Points: 1)

What is the future value of an annuity due that pays $800 per year for 15 years? Use an annual effective interest rate of 9.50%.

a. $24,432

b. $24,988

c. $26,238

d. $26,753

e. $27,501

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7. (Points: 1)

Estimate the effective annual rate (EAR) for a continuously compounded annual nominal rate of 8.00%.

a. 8.2109%

b. 8.4344%

c. 8.5999%

d. 8.7264%

e. 8.328%

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8. (Points: 1)

Consider a $100,000, 30-year, 5.4% mortgage with monthly payments. What portion of the payments during the first 25 months goes toward principal?

a. 20.17%

b. 20.98%

c. 21.25%...