Exam2 FIN370 B Key

2231 Words Nov 1st, 2014 9 Pages
2. Which one of the following statements is correct?
A. The future value of an annuity is unaffected by the amount of each annuity payment.
B. The present value of an annuity is unaffected by the number of the annuity payments.
C. The present value of an annuity increases when the interest rate decreases.
D. The present value of an annuity increases when the interest rate increases.
E. The future value of an annuity increases when the interest rate decreases. 4. A debenture is:
A. long-term debt secured by fixed assets of the borrower.
B. unsecured debt that generally matures in less than ten years.
C. unsecured debt that generally matures in ten years or more.
D. long-term debt secured by real estate.
E. any type of debt that is
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B. $1,021.60; $992.50

7. Trevor's Tires is offering a set of 4 premium tires on sale for $550. The credit terms are 24 months at $20 per month. What is the interest rate on this offer?
B. 12.74 percent 8. Karen has $16,000 that she wants to invest for 1 year. She can invest this amount at The North Bank and earn 5.50 percent simple interest. Or, she can open an account at The South Bank and earn 5.39 percent interest, compounded monthly. If Karen decides to invest at The North Bank, she will:
C. earn $4.03 less than if she had invested with The South Bank. 9. The coupon rate for a bond is best defined as the:
A. annual interest divided by the face value. 10. The interest rate used to compute the present value of a future cash flow is called the:
B. discount rate

13. The yield to maturity on a bond is:
E. the current required market rate. 14. Global Enterprises has just signed a $3 million contract. The contract calls for a payment of $.5 million today, $.9 million one year from today, and $1.6 million two years from today. What is this contract really worth if Global Enterprises can earn 12 percent on its money?

B. $2.58 million 15. The condominium at the beach that you want to buy costs $249,500. You plan to make a cash down payment of 20 percent and finance the balance over 10 years at 6.75 percent. What will be the amount of your monthly mortgage payment?
C.

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