I have attached a file with questions. I wasn’t sure if the answers I picked were right, so could you please look them over and comment on those I got wrong? Thank you!

I have attached a file with questions. I wasn’t sure if the answers I picked were right, so could you please look them over and comment on those I got wrong? Thank you!

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Which one of the following statements related to annuities and perpetuities is correct?

A perpetuity comprised of $100 monthly payments is worth more than an annuity comprised of $100 monthly

payments, given an interest rate of 12 percent, compounded monthly.

Most loans are a form of a perpetuity.

Perpetuities are finite but annuities are not.

An ordinary annuity is worth more than an annuity due given equal annual cash flows for ten years at 7 percent

interest, compounded annually.

The present value of a perpetuity cannot be computed, but the future value can.

A preferred stock pays an annual dividend of $2.60. What is one share of this stock worth today if the rate of return is 11.75

percent?

$18.48

$28.80

$30.55

$22.13

$20.00

Which one of the following statements correctly states a relationship?

Time and future values are inversely related, all else held constant.

Interest rates and time are positively related, all else held constant.

An increase in the discount rate increases the present value, given positive rates.

An increase in time increases the future value given a zero rate of interest.

Time and present value are inversely related, all else held constant.

You want to have $65,000 in your savings account 9 years from now, and you’re prepared to make equal annual

deposits into the account at the end of each year.

Required:

If the account pays 6.5 percent interest, what amount must you deposit each year?

$7,222.22

$4,224.98

$4,225.01

$5,540.47

$9,851.25

Which one of the following terms is used to describe a loan wherein each payment is equal in amount and includes both interest

and principal?

pure discount loan

modified loan

interest-only loan

balloon loan

amortized loan

An investment will pay you $23,000 in 7 years. The appropriate discount rate is 10 percent compounded daily.

Required:

What is the present value?

$11,765.23

$11,422.56

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$10,851.43

$11,802.64

$11,993.68

A monthly interest rate expressed as an annual rate would be an example of which one of the following rates?

stated rate

effective annual rate

discounted annual rate

periodic monthly rate

consolidated monthly rate

Which of the following statements related to interest rates are correct?

I. Annual interest rates consider the effect of interest earned on reinvested interest payments.

II. When comparing loans, you should compare the effective annual rates.

III. Lenders are required by law to disclose the effective annual rate of a loan to prospective borrowers.

IV. Annual and effective interest rates are equal when interest is compounded annually.

I and II only

II and III only

I, II, and III only

II and IV only

II, III, and IV only

The entire repayment of which one of the following loans is computed simply by computing a single future value?

interest-only loan

amortized loan

pure discount loan

bullet loan

balloon loan

What is the interest rate charged per period multiplied by the number of periods per year called?

annual percentage rate

periodic interest rate

daily interest rate

effective annual rate

compound interest rate

Which one of the following terms is used to describe a loan that calls for periodic interest payments and a lump sum principal

payment?

interest-only loan

amortized loan

balloon loan

modified loan

pure discount loan

Which one of the following terms is defined as a loan wherein the regular payments, including both interest and principal

amounts, are insufficient to retire the entire loan amount, which then must be repaid in one lump sum?

interest-only loan

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