1. Which of the following financial assets is least likely to have an active secondary market?
A) Common stock of a large public firm
B) Bank loans made to smaller firms
C) Bonds of a major, multinational corporation
D) Debt issued by the U.S. Treasury
2. Which of the following is not a function of financial markets?
A) allow individuals to diversify their risk.
B) provide convenient ways to make large payments.
C) allow individuals to purchase a range of goods online.
D) provide funds to companies that wish to expand.
3. Which of the following information is not provided by the financial markets?
A) The price of six ounces of gold
B) The cost of borrowing $500,000 for 5 years
C) Microsoft's earnings in 2013
D) The cost of one million yen in U.S. dollars
4. What is the future value of $10,000 on deposit for 2 years at 6% simple interest?
A) $10,600
B) $11,236
C) $11,200
D) $13,382.26
5. he salesperson offers, "Buy this new car for $25,000 cash or, with an appropriate down payment, pay $500 per month for 48 months at 8% interest." Assuming that the salesperson does not offer a free lunch, calculate the "appropriate" down payment.
A) $1,000.00
B) $4,519.04
C) $5,127.24
D) $8,000.00
6. How much more is a perpetuity of $1,000 worth than an annuity of the same amount for 20 years? Assume an interest rate of 10% and cash flows at the end of each period.
A) $297.29
B) $1,486.44
C) $1,635.08
D) $2,000.00
7. If the interest rate is 6%, which of these investments would you prefer?
A) A single payment of $500 in year 3.
B) A payment of $40 a year for 20 years starting in one year’s time.
C) A perpetuity of $30 a year starting in one year’s time.
D) A payment of $342.17 today
8. The sum of $3,000 is deposited into an account paying 10% annually. If $1,206 is withdrawn at the end of years 1 and 2, how much then remains in the account?"
A) $1,326.97
B) $1,206.34
C) $1,097.40
D) $587.32
9. The present value of an annuity stream of $100 per year is $614 when valued at a 10% rate. By approximately how much would the value change if these were annuities due?
A) $10
B) $61.40
C) $10 ×Number of years in annuity stream
D) $6.14 × Number of years in annuity stream
10. "Give me $5,000 today and I'll return $10,000 to you in 5 years," offers the investment broker. To the nearest percent, what annual interest rate is being offered?
A) 12.29%
B) 13.67%
C) 14.87%
D) 12.84%