02 Jan Which of the following

Question 1 (1 point)

You purchase a two year annuity for $2800. The annuity pays $1500 each year. What is the annuity’s approximate IRR?

Question 1 options:

2.3%

8.6%

4.5%

10%

Question 2 (1 point)

You can purchase two three-year annuities today. One is valued at $2000, the other at $4000. The 1st annuity begins paying $1000 in a year. The 2nd annuity begins paying $1500 in two years. The interest rate is 5%. What is the PV of the portfolio?

Question 2 options:

$6613.60

$613.60

$6808.12

$808.12

Question 3 (1 point)

Of the following car financing options, which one would you prefer while assuming that you prefer paying the least amount of dollars and that you face a 10% annual compound interest rate on all your financial decisions?

Question 3 options:

A payment $10,000 today and another of $10,000 in one year from today.

A lump-sum payment of $19,000 today only.

A lump-sum payment of $20,000 today only.

A lump-sum payment of $20,000 in two years from today.

Question 4 (1 point)

Which of the following could be an appropriate period used in a present value calculation?

Question 4 options:

A month.

Three months.

A year

All of these answers.

Question 5 (1 point)

In a year, you expect to receive a payment of $1 million in a year. That annual interest rate is 5%. What is the present value of the future payment?

Question 5 options:

$995,025

$1,050,000

$666,667

$952,381

Question 6 (1 point)

Assume you invest money in a bond that will pay you $250,000 in four years. The bond has an annual interest rate of 5%. You do not receive interest payments while you own the bond; it is zero-coupon. What is the bond’s present value?

Question 6 options:

$240,385

$205,482

$205,676

$238,095

Question 7 (1 point)

What is the present value of $100,000 that will be received 5 years from today if you face a 10% compound interest rate every year (rounded up to the nearest dollar)?

Question 7 options:

62092

72092

82092

52092

Question 8 (1 point)

Given an inflation rate of 4% and a real rate of 5%, what is the corresponding nominal rate?

Question 8 options:

4%

109.2%

9.2%

9%

Question 9 (1 point)

A bond has a coupon rate of 7% and a yield to maturity rate of 8%. The bond is ____.

Question 9 options:

selling at a discount.

selling at par.

selling at yield

selling at a premium.

Question 10 (1 point)

A bond grants its holder the option to sell the bond back to the issuer at a fixed price at a fixed date prior to the bond’s maturity. When evaluating the bond’s value, the company should calculate the bond’s _____.

Question 10 options:

yield to put.

yield to call.

yield to worst.

yield to discount.

Question 11 (1 point)

Which of the following statements regarding bonds and par values is true?

Question 11 options:

The par value of a bond never changes.

Corporate bonds usually have par values equal to $10,000.

A bond selling at par has a coupon rate so the bond is worth its redemption value at maturity.

All of these answers.

Question 12 (1 point)

A zero-coupon bond has a face value of $1000 and a market value of $800. The bond will mature in 5 years. What is its yield to maturity?

Question 12 options:

-4.37%

4.56%

104.56%

205.17%

Question 13 (1 point)

An annuity has an interest rate of 7% and makes a quarterly payment of $2000. The annuity is to last for 5 years. What is the present value of the annuity.

Question 13 options:

$32,801.58

$21,188.03

$8,200.40

$2,118.80

Question 14 (1 point)

Which of the following influences a bond’s price risk?

Question 14 options:

Mutual funds, pension managers and banks divest themselves of the issuing company’s bonds.

The possibility the issuing company’s credit rating will be decreased.

All of these answers.

The possibility that market interest rates will increase.

Question 15 (1 point)

Which of the following is the definition of the Macaulay duration?

Question 15 options:

All of these answers.

The price sensitivity of a bond.

The percentage change in price for a unit change in yield.

The weighted average time, measured in years, until cash flows are received.

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