Finance Problems

Question 1 of 10 The Friendly Bank wants to earn an effective annual return on its consumer loans of 12 percent peryear. The bank uses daily compounding. What rate is the bank most apt to quote on these loans? A. 11.76 percent B. 11.38 percent C. 11.33 percent D. 12.12 percent E. 12.00 percentQuestion 2 of 10 You have just purchased a new warehouse. To finance the purchase, you arranged for a 30-yearmortgage loan for 65 percent of the $2.5 million purchase price. The monthly payment on this loanwill be $10,400. What is the effective annual rate on this loan? A. 6.82 percent B. 6.25 percent C. 6.46 percent D. 7.01 percent E. 7.27 percentQuestion 3 of 10 You have your choice of two investment accounts. Investment A is a five-year annuity that featuresend-of-month $2,500 payments and has an interest rate of 11.5 percent compounded monthly.Investment B is a 10.5 percent continuously compounded lump sum investment, also good for fiveyears. How much would you need to invest in B today for it to be worth as much as investment A fiveyears from now? A. $108,206.67 B. $119,176.06 C. $124,318.08 D. $129,407.17 E. $131,008.15Question 4 of 10 One year ago, JK Mfg. deposited $20,500 in an investment account for the purpose of buying newequipment four years from today. Today, it is adding another $15,000 to this account. The companyplans on making a final deposit of $10,000 to the account one year from today. How much will beavailable when it is ready to buy the equipment, assuming the account pays 3.5 interest? A. $53,408 B. $53,919 C. $56,211 D. $52,648 E. $58,021Question 5 of 10 Troy will receive $7,500 at the end of year 2. At the end of the following two years, he willreceive $9,000 and $12,500, respectively. What is the future value of these cash flows at the endof year 5 if the interest rate is 8 percent? A. $38,418 B. $32,907 C. $33,445 D. $36,411 E. $35,255Question 6 of 10 Sue plans to save $4,500, $0, and $5,500 at the end of each of the next three years, respectively.What will her investment account be worth at the end of the third year if she earns an annual rateof 4.15 percent? A. $10,528.12 B. $10,381.25 C. $9,907.11 D. $11,526.50 E. $10,812.07Question 7 of 10 A wealthy benefactor just contributed to your college’s scholarship program. This gift will provide$20,000 in scholarships next year with that amount increasing by 2 percent annually thereafter. Ifthe discount rate is 6.5 percent, what is the current value of this perpetual gift? A. $307,700 B. $350,000 C. $525,000 D. $444,444 E. $550,750Question 8 of 10 A preferred stock pays an annual dividend of $4.10. What is one share of this stock worth today ifthe rate of return is 9.68 percent? A. $41.48 B. $41.18 C. $42.36 D. $39.87 E. $42.90Question 9 of 10 You just paid $750,000 for an annuity that will pay you and your heirs $36,000 a year forever. Whatrate of return are you earning on this policy? A. 4.75 percent B. 5.10 percent C. 5.33 percent D. 4.80 percent E. 4.72 percentQuestion 10 of 10 DLM preferred stock has a 5.8 percent dividend yield. The stock is currently priced at $36.20 pershare. What is the amount of the annual dividend? A. $2.30 B. $2.35 C. $2.40 D. $2.10 E. $1.90