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Post-Test
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1
A Treasury bill is an example of a pure discount loan.
A)True
B)False
2
In almost all present and future value computations, it is implicitly assumed that the cash flows occur at the beginning of each period.
A)True
B)False
3
In order to compare different investment opportunities (each with the same risk) with interest rates reported in different manners you should:
A)convert each interest rate to an effective annual rate.
B)convert each interest rate to a monthly nominal rate.
C)convert each interest rate to an annual nominal rate.
D)compare the published annual rates.
E)convert each interest rate to an APR.
4
Which of the following can you compute?
I. present value of a perpetuity
II. interest rate on a perpetuity given the present value and payment
III. future value of an annuity due
IV. future value of a perpetuity
A)I and II only
B)I and III only
C)II and IV only
D)I, II, and IV only
E)I, II, and III only
5
You need to borrow $23,500 to buy a truck. The current loan rate is 5.9 percent compounded monthly and you want to pay the loan off in equal monthly payments over 5 years. What is your monthly payment?
A)$391.67
B)$451.01
C)$453.23
D)$463.64
E)$471.32
6
Fast Eddie's Used Cars will sell you a used Ford Escort for $3,500 with no money down. You agree to make weekly payments for 2 years, beginning one week after you buy the car. The stated rate on the loan is 22 percent. What is the amount of each payment?
A)$32.96
B)$37.06
C)$38.19
D)$41.67
E)$49.65
7
You are considering investing $10,000 in a 10-year annuity. The rate of return you desire is 6.5 percent. What annual cash flow from the annuity will provide the desired return?
A)$1,240.06
B)$1,306.15
C)$1,391.05
D)$1,409.18
E)$1,423.34
8
Wayne wishes to save money to provide for his retirement. Beginning one month from today, Wayne will deposit a fixed amount into a retirement savings account that will earn 9 percent compounded monthly. He will make 360 such deposits. Then, one year after making his final deposit, he will withdraw $60,000 annually for 25 years. The account balance will reduce to zero when the last withdrawal is made. The fund will earn 6.50 percent compounded annually during these last 25 years. How much should his monthly deposits be?
A)$399.77
B)$596.13
C)$661.62
D)$703.81
E)$764.35
9
You work for a furniture store. The store advertises that you can purchase a $1,200 sofa and pay no interest or payments for twelve months. In other words, you buy the sofa today and pay the store $1,200 one year from now. However, if you decide to pay cash today, they will discount the sofa to a price of $1,080. In effect, what interest rate are you paying if you go with the no interest for one year option?
A)0.00 percent
B)8.88 percent
C)10.00 percent
D)11.11 percent
E)12.00 percent
10
Phil and Theresa wish to buy a new home. The price is $147,500 and they plan to pay 10 percent in cash and finance the balance. Home Savings and Loan will lend them the cash they need at an 8 percent fixed rate for 30 years, with monthly payments to begin in one month. Assuming that they pay off the loan over the 30-year period as planned, what will be the total cost, including interest? (Round your answer to the nearest whole dollar.)
A)$267,503
B)$271,996
C)$350,665
D)$353,760
E)$365,415





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