Question 1. What is the future value, where present value=1000, r=6% and t=1?
a. 1060.00
b. 1600.00
c. 943.40
d. 900.00
Question 2. What is the future value, where present value=1000, r=6% and t=10?
a. 1600.00
b. 400.00
c. 1790.85
d. 1645.32
Question 3. What is the present value, where future value = 1000, r=6% and t=1?
a. 1060.00
b. 1600.00
c. 943.40
d. 900.00
Question 4. What is the present value, where future value = 1000, r=6% and t=5?
a. 1300.00
b. 747.26
c. 545.38
d. 700.00
Question 5. What is the present value, where future value = 1000, r=6% and t=10?
a. 558.39
b. 1600.00
c. 400.00
d. 428.32
Question 6. Calculate the interest rate implied, where PV=1000, t=5, FV=1436.
a. 5.6%
b. 6.2%
c. 7.5%
d. 9.2%
Question 7. Calculate the interest rate implied, where PV=1000, t=11, FV=1750.
a. 5.2%
b. 3.7%
c. 7.5%
d. 9.2%
Question 8. How long will it take for $500 to grow to $1,000 at 8% per year?
a. 6 yrs
b. 7
c. 8
d. 9
Question 9. How long will it take for $500 to grow to $700 at 5% per year?
a. 9.1 yrs
b. 10.9
c. 11.7
d. 13.2
Question 10. A famous quarterback just signed a $10 million contract providing $2 million a year for 5 years. The interest rate is 10%. The quarterback's contract present value is?
a. 5.2 million
b. 6.0
c. 7.6
d. 8.9
Question 11. A less famous receiver just signed an $8 million contract providing $3 million now and $1 million for the next 5 years. The interest rate is 10%. The receiver's contract present value is?
a. 3.8 million
b. 5.6
c. 7.2
d. 8.8
Question 12. What is the present value of a 5-year annuity of $100 if the discount rate is 6%?
a. 326.25
b. 421.24
c. 532.83
d. 601.23
Question 13. Consider a 4-year amortizing loan. You borrow $1,000 initially, and repay it in four equal annual year-end payments. If the interest rate is 7%, what is the annual payment?
a. 189.65
b. 220.21
c. 295.23
d. 401.89
Question 14. The $40 million lottery payment that you just won actually pays $2 million per year for 20 years. If the discount rate is 5%, and the first payment comes in 1 year, what is the present value of the winnings?
a. 40.00 million
b. 38.26
c. 24.92
d. 19.64
Question 15. You believe you will need to have saved $500,000 by the time you retire in 35 years. If the interest rate is 9% per year, how much must you save each year until retirement to meet your retirement goal?
a. 3230.77
b. 2317.92
c. 1875.01
d. 1306.00
Question 16. Most bonds in the US make coupon payments semiannually.
a. True
b. False
Question 17. When the market interest rate exceeds the coupon rate, bonds sell for less than face value.
a. True
b. False
Question 18. The yield to maturity is defined as the discount rate that makes the present value of the bond's payments equal its price.
a. True
b. False
Question 19. Junk bonds have higher credit quality than Treasury securities.
a. True
b. False
Question 20. Bond investors calculate yield to call rather than yield to maturity for bonds at high risk of being called.
a. True
b. False
Question 21. The current yield understates the return of premium bonds and overstates that of discount bonds.
a. True
b. False
Question 22. The current yield equals the yield to maturity if the face value of the bond is the same as the market price of the bond.
a. True
b. False
Question 23. A $1000 IBM bond carries a coupon rate of 8%, has 9 years until maturity, and sells at a yield to maturity of 7%. What interest payments do bondholders receive each year?
a. $70
b. 80
c. 90
d. 100
Question 24. A $1000 IBM bond carries a coupon rate of 8%, has 9 years until maturity, and sells at a yield to maturity of 7%. The bond sells at a discount.
a. True
b. False
Question 25. A $1000 IBM bond carries a coupon rate of 8%, has 9 years until maturity, and sells at a yield to maturity of 7%. The bond price will go down if yield to maturity also goes down.
a. True
b. False