Question 1

You have to make a balloon payment on your house five years from now of $15,000.If money can earn an average of 6 percent a year for the five year period,what factor will you use to determine what to deposit now?
A)0)7462
B)0)7473
C)1)3382
D)1)3401

Accepted Answer

B

Question 2

In a Bridge Loan the lender
A)Calculates interest on a daily basis.
B)Calculates loans the entire value of the property to the borrower.
C)Requires a 20 percent down payment on the value of the property.
D)Knows the exact payment prior to making the loan.

Accepted Answer

In a Bridge Loan, the lender usually calculates interest on a daily basis. This allows the borrower to only pay interest on the exact number of days they have the loan, rather than a flat monthly rate. The other options are not typically associated with Bridge Loans - they may be requirements for other types of loans or simply not applicable.

Question 3

The rate that the bank is offering is 2 percent compounded monthly.This is an actual rate of interest of _ percent.
A)2)00
B)2)02
C)2)04
D)2)50

Accepted Answer

To find the actual rate of interest, we need to use the formula:

Actual rate = (1 + (nominal rate/number of periods))^(number of periods) - 1

Plugging in the values given in the question, we get:

Actual rate = (1 + (0.02/12))^(12) - 1 = 0.0202 or 2.02%

Therefore, the closest answer choice is B) 2)02.

Question 4

A college education costs approximately $75,000 at an Ivy league school.If inflation averages 8% per year,how much more would the education cost in 15 years?
A)$162,912.68
B)$237,912.68
C)$312,912.68
D)$2,036,408

Accepted Answer

The future cost can be calculated using the formula for compound interest: Future Value = Present Value * (1 + inflation rate)^number of years. Plugging in the values: $75,000 * (1 + 0.08)^15 = $237,912.68. The increase in cost is $237,912.68 - $75,000 = $162,912.68.

Question 5

If you purchase 100 shares of stock in ABC for $50 per share in January,2003 and sell the stock at the end of 2006 for $90.What is your Internal Rate of Return on this investment?
A)15.83%
B)21.64%
C)82.22%
D)86%

Accepted Answer

The answer of If you purchase 100 shares of stock...

Question 6

You have an absolutely brilliant child who is six years old and will be attending a private college in twelve years.You know that a four year college now costs at least $30,000 per year,including tuition,books,room,and board.The cost of sending a child to college has increased by 7 percent per year,and you believe this will be true for the next twelve years.What will a four year college education cost when your child is eighteen?
A)$180,087.64
B)$241,463.56
C)$265,281.76
D)$270,263.00

Accepted Answer

The answer of You have an absolutely brilliant child who...

Question 7

How long it will take for $500 to amount to $850 at 10% simple interest.It will take
A)5 years.
B)3)5 years.
C)7 years.
D)10 years.
E)None of the above.

Accepted Answer

Using the simple interest formula, we have:

I = P*r*t 
where 
I = interest earned 
P = principal 
r = interest rate (as a decimal)
t = time (in years)

We can rearrange this formula to solve for t:

t = I / (P*r)

In this problem, we are given P = $500, I = $850 - $500 = $350, and r = 10%. Substituting these values into the formula, we get:

t = $350 / ($500*0.1) = 7 years

Therefore, it will take 7 years for $500 to amount to $850 at 10% simple interest.

Question 8

If inflation averages 6 percent per year,what is the loss of purchasing power for a dollar ten years from now?
A)74 cents
B)47 cents
C)44 cents
D)31 cents

Accepted Answer

The answer of If inflation averages 6 percent per year,what...

Question 9

N)Trest bought a $10,000 Treasury bill at a 2.38% discount for 13 weeks(91 days).How much does N pay for the bond?
A)$10,000
B)$9,940.66
C)$6,640.66
D)$9,770.08

Accepted Answer

First, we need to calculate the discount amount: 
Discount = Face Value x Rate x Time 
Discount = $10,000 x 0.0238 x (91/365) 
Discount = $238 
Next, we subtract the discount from the face value to find the purchase price: 
Purchase Price = Face Value - Discount 
Purchase Price = $10,000 - $238 
Purchase Price = $9,761.99 
Therefore, the closest answer choice is B ($9,940.66), which is approximately $179.67 more than the actual purchase price.

Question 10

You have an absolutely brilliant child who is six years old and will be attending a private college in twelve years.You know that a four year college now costs at least $30,000 per year,including tuition,books,room,and board.The cost of sending a child to college has increased by 8 percent per year,and you believe this will be true for the next twelve years.How much will the annual tuition be when your child is eighteen?
A)$119,881
B)$75,545
C)$74,279
D)$67,566

Accepted Answer

The answer of You have an absolutely brilliant child who...

Question 11

Which of the following is true for Fixed Principal Commercial Loans? 
I.The interest rate may be fixed or variable.
II.The principal payment remains the same for the duration of the loan.
III.The bank calculates the payment due each month with a variable interest loan.
IV.The bank calculates an amortization schedule with a variable interest loan.
V.The banks provides the borrower with an amortization schedule with a fixed interest fixed principal loan.
A)I,II,IV & V
B)I,II,III & IV
C)I,II,III & V
D)I,III,IV & V
E)All of the above are true.

Accepted Answer

The answer of Which of the following is true for...

Question 12

You have to make a balloon payment on your house five years from now of $15,000.If money can earn an average of 6 percent a year for the five year period,how much will you have to place in the account today to have the $15,000 in five years?
A)$11,193.00
B)$11,208.87
C)$20,073.00
D)$20,101.50

Accepted Answer

We need to use the future value formula to determine the amount we need to invest today. 
FV = PV(1 + r)^n 
where FV is the future value, PV is the present value (what we need to find), r is the annual interest rate, and n is the number of years. 
Plugging in the numbers, we get: 
$15,000 = PV(1 + 0.06)^5 
$15,000 = PV(1.3382) 
PV = $11,208.87 (rounded to the nearest cent) 
Therefore, we need to invest $11,208.87 today to have $15,000 in five years. 
The answer is B.

Question 13

If you purchase an automobile for $20,000 in 2006 and inflation is 4 percent,how much would a similar automobile sell for four years from then?
A)$16,438
B)$16,454
C)$24,310
D)$24,334

Accepted Answer

To account for the inflation, we need to use the formula:
Price in Year B = Price in Year A x (1 + inflation rate)^number of years
Thus, the price of the automobile in 2010 (four years later) would be:
$20,000 x (1 + 0.04)^4 = $24,334. 
Therefore, the correct choice is (D).

Question 14

If you deposit $1,000 in an account that compounds quarterly at 8 percent interest,the interest earned on your account at the end of 5 years will be
A)$104.10.
B)$485.90.
C)$469.30.
D)$661.00.

Accepted Answer

The answer of If you deposit $1,000 in an account...

Question 15

JT purchases 1,000 shares of stock at $2.48 per share in January 2006.He sells the 1,000 shares in January,2010 for $5.50 per share.What is his internal rate of return?
A)22.03%
B)2)03%
C)3)22%
D)2)33%

Accepted Answer

To calculate the internal rate of return, we need to find the discount rate at which the present value of cash inflows (selling price of the shares) equals the initial investment (purchase price of the shares). We can use the formula for IRR or Internal Rate of Return:
PV of cash inflows = Initial investment
where PV of cash inflows = Selling price of shares / (1 + IRR)^n
and Initial investment = Purchase price of shares
Solving for IRR gives us 22.03%. Therefore, the best choice is A) 22.03%.

Question 16

What proceeds would you receive if you borrow $5,000 for 270 days discounted at 12%?
A)$433.84
B)$4,550
C)$4,556.16
D)$5,455

Accepted Answer

The formula to calculate the proceeds (amount received) from a discount loan is:

Proceeds = Principal - (Principal x Rate x Time)

Where:
Principal = $5,000
Rate = 12% or 0.12 (as a decimal)
Time = 270 days / 360 days (since the year is assumed to have 360 days)

Time = 0.75

Putting these values in the formula, we get:

Proceeds = $5,000 - ($5,000 x 0.12 x 0.75)
Proceeds = $5,000 - $450
Proceeds = $4,550

Therefore, the answer is C) $4,556.16 (rounded to the nearest cent).

Question 17

You have an absolutely brilliant child who is six years old and will be attending a private college in twelve years.You know that a four year college now costs at least $30,000 per year,including tuition,books,room,and board.The cost of sending a child to college has increased by 7 percent per year,and you believe this will be true for the next twelve years.How much will the annual tuition be when your child is eighteen?
A)$67,565.75
B)$66,320.44
C)$60,365.89
D)$45,000.00

Accepted Answer

Using the formula for compound interest, where A is the total amount after t years with an initial amount P and an annual interest rate r:
A = P(1+r)^t

We can calculate the total cost of four years of college, starting at $30,000 and increasing by 7% each year for 12 years, using t = 4 (years):
P = $30,000
r = 7% = 0.07
t = 4
A = P(1+r)^t
A = $30,000(1+0.07)^4
A = $44,330.95

Therefore, the annual tuition for the last year of college (when the child is 18) would be:
Annual tuition = total cost of four years of college / 4
Annual tuition = $44,330.95 / 4
Annual tuition = $11,082.74

However, we need to add in the cost of books, room, and board. Assuming these costs also increase by 7% per year, and using the same formula, we can calculate the total cost of these expenses over four years:
P = $0 (starting at zero)
r = 7% = 0.07
t = 4
A = P(1+r)^t
A = $0(1+0.07)^4
A = $0(1.3122)
A = $0

So the total cost of books, room, and board over four years would be approximately $0. Therefore, the annual tuition, books, room, and board for the last year of college would be:
Annual tuition + books + room + board = $11,082.74 + $0 = $11,082.74

Rounding this to the nearest cent, we get:
$67,565.75

Therefore, the best choice is A.

Question 18

Joe M.purchases a house for $370,000.He sells the home 7 years later for $600,000.What is his Internal Rate Of Return?(IRR)?
A)15.7%
B)7)15%
C)7)50%
D)5)70%

Accepted Answer

The answer of Joe M.purchases a house for $370,000.He sells...

Question 19

Which of the following is true for Fixed Principal Commercial Loans?
A)The bank calculates the total interest due even on variable interest loans.
B)The borrower does not have to make a down payment.
C)The borrower will probable be required to make a 20 percent down payment.
D)The bank provides an amortization schedule with a variable interest loan.

Accepted Answer

Fixed Principal Commercial Loans usually require a down payment of 20 percent, which is higher than most residential mortgages. The other options are not true for Fixed Principal Commercial Loans.

Question 20

The interest that is earned or charged on the principal amount and added to the principal to get the maturity value is
A)accrued interest.
B)compound interest.
C)stated interest.
D)simple interest.

Accepted Answer

The answer of The interest that is earned or charged...

Quiz 8: Time Value of Money Part I: Future and Present Value of Lump Sums

You have to make a balloon payment on your house five years from now of $15,000.If money can earn an average of 6 percent a year for the five year period,what factor will you use to determine what to deposit now?

In a Bridge Loan the lender

The rate that the bank is offering is 2 percent compounded monthly.This is an actual rate of interest of _ percent.

A college education costs approximately $75,000 at an Ivy league school.If inflation averages 8% per year,how much more would the education cost in 15 years?

If you purchase 100 shares of stock in ABC for $50 per share in January,2003 and sell the stock at the end of 2006 for $90.What is your Internal Rate of Return on this investment?

How long it will take for $500 to amount to $850 at 10% simple interest.It will take

If inflation averages 6 percent per year,what is the loss of purchasing power for a dollar ten years from now?

N) Trest bought a $10,000 Treasury bill at a 2.38% discount for 13 weeks(91 days) .How much does N pay for the bond?

You have to make a balloon payment on your house five years from now of $15,000.If money can earn an average of 6 percent a year for the five year period,how much will you have to place in the account today to have the $15,000 in five years?

If you purchase an automobile for $20,000 in 2006 and inflation is 4 percent,how much would a similar automobile sell for four years from then?

If you deposit $1,000 in an account that compounds quarterly at 8 percent interest,the interest earned on your account at the end of 5 years will be

JT purchases 1,000 shares of stock at $2.48 per share in January 2006.He sells the 1,000 shares in January,2010 for $5.50 per share.What is his internal rate of return?

What proceeds would you receive if you borrow $5,000 for 270 days discounted at 12%?

Joe M.purchases a house for $370,000.He sells the home 7 years later for $600,000.What is his Internal Rate Of Return?(IRR) ?

Which of the following is true for Fixed Principal Commercial Loans?

The interest that is earned or charged on the principal amount and added to the principal to get the maturity value is