1.You have been approved for a $70,000 loan toward the purchase of a new home at 10% interest. The mortgage is for 30 years. How much are the approximately annual payments of the loan? Hint: Assume you pay yearly.
- $7425
- $8690
- $5740
- None of the above
2. First Choice Bank pays 9% APR compounded quarterly on its business loans. National Emerald Bank pays 16% APR compounded daily. The EAR for First Choice and National Emerald Bank are:
- 9.31% and 17.35%, respectively
- 9% and 17.50%, respectively
- 9.31% and 17.50%, respectively
- 9% and 17.35%, respectively
3. ABC Electronics is considering an investment that will have cash flows of $16,000, $5,000 and $4,000 for years 1 through 3. What is the approximate value of this investment today if the appropriate discount rate is 9% per year?
- $23,250
- $27,250
- $21,970
- None of the above
4. You deposited $8,000 in your bank account today. An increase in which of the following will increase the future value of your deposit assuming that all interest is reinvested? Assume the interest rate is a positive value. Select all answers that apply:
- interest rate
- initial amount of your deposit
- frequency of the interest payments
- None of the above will increase the value of the investment
5. If you borrow $50,000 today at 10% interest for eight years. How much of your first payment will be applied towards the principal of the loan? (Points : 3)
- $5,000
- $4,372
- $4,790
- zero, all will be applied towards the interest
6. Match the following terms with the examples as appropriate:
Potential Matches:
1 : You obtained a business loan for four months. The loan will allow you to paid $300 in interest for three months and a final payment of interest and principal at the end of the four month.
2 : You obtained a mortgage to buy a home. You will pay $800 per month to cover both interest and principal.
3 : a way used by the US government to borrow money on short-term basis.
4 : You borrow $1,000 from your best friend. In return, you will give him back $1150 in 3 months.
- : Pure discount loan
- : Amortized Loan
- : Interest-only Loan
- : Treasury Bill
7.You are interested in saving to buy a new machine that costs $387,120. You can deposit $32,805 in your bank today. If your bank pays 14% annual interest on its accounts, how long will it take you to save for the new machine?
- about 19 years
- about 5 years
- about 12 years
- Can not be determined