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>>I have tried to find some sample Exam 2 questions. >>Since we did not do a second exam the last time I >>taught 3300, I have no pure exams. Instead I looked >>through old quizzes and found some questions that >>covered the chapter 7-10 material. I will post >>additional questions as I get the chance, if I can >>find relevant questions. >> >>Note, if someone will attempt to post answers to these >>questions, then I will correct their answers. >> >> >>1. You have a $150,000 30-year mortgage with an >>interest rate of 7.20% p.a., compounded monthly. >>Payments are made monthly. What is the remaining >>balance on the mortgage after 10 years? > >>d. $129,317.74 > >> >>2. You have just taken out a 10-year, $24,000 loan to >>purchase a new car. This loan is to be repaid in 120 >>equal end-of-month installments. If each of the >>monthly installments is $300, what is the effective >>annual interest rate on this car loan? > >>e. 9.0438% >> >>3. The NPV (t=0) of the following cash flow stream is >>Zero (0), when discounted at a nominal annual rate of >>10% (quarterly compounding). The value of the missing >>(i.e., t=3) cash flow is closest to >> >>Year 1 2 3 4 5 6 >>Cash Flow -30 -30 ??? +20 +40 +50 >> >> >>b. -18 >> >>> >>4. The last dividend just paid by Quantum Inc. was >>$2.00. Quantum's growth rate is expected to be a >>constant 15 percent for 3 years, after which dividends >>are expected to grow at a rate of 10 percent forever. >>Quantum's required rate of return on equity (ks) is 14 >>percent. What is the current price of Quantum's >>common stock? >>a. $62.57 > >>5. Which of the following is the best description of >>the overall goal of the financial manager in a >>corporation where shares are publicly traded? >> > >>d. Maximize the value of outstanding shares > >>11. The current price of a 10-year, $1,000 par value >>bond is $1,158.91. Interest on this bond is paid every >>six months, and the nominal annual yield is 14 >>percent. Given these facts, what is the annual coupon >>rate on this bond? >> > d. 17% >> >> >>13. Waters Corporation has a stock price of $20 a >>share. The stock's year-end dividend is expected to be >>$2 a share (D0 = $2.00). The stock's required rate of >>return is 15 percent and the stock's dividend is >>expected to grow at the same constant rate forever. >>What is the expected price of the stock seven years >>from now? >> >> d. $23 >> >> >>1. Which of the following statements is most >>correct? >> >>a. The present value of an annuity due will exceed the >>present value of an ordinary annuity (assuming all >> else equal). >>b. The future value of an annuity due will exceed the >>future value of an ordinary annuity (assuming all else >> equal). >> >>d. Statements a and b are correct. >> >> >> >>2. Frank Lewis has a 30-year, $100,000 mortgage with >>a nominal interest rate of 10 percent and monthly >>compounding. Which of the following statements >>regarding his mortgage is most correct? >> >. >>b. The proportion of the monthly payment which >>represents interest will be lower for the last payment >>than >> for the first payment on the loan. >>c. The total dollar amount of principal being paid off >>each month gets larger as the loan approaches >maturity. > >>e. Statements b and c are correct. >> >> >>3. Your uncle has agreed to deposit $3,000 in your >>brokerage account at the beginning of each of the next >>five years (t = 0, t = 1, t = 2, t = 3 and t = 4). You >>estimate that you can earn 9 percent a year on your >>investments. How much will you have in your account >>four years from now (at t = 4)? (Assume that no money >>is withdrawn from the account until t = 4.) >> >> >>b. $17,954.13 >> >> >> >>4. An investment pays you 9 percent interest >>compounded semiannually. A second investment of equal >>risk, pays interest compounded quarterly. What nominal >>rate of interest would you have to receive on the >>second investment in order to make you indifferent >>between the two investments? >> >>b. 8.90% > >>5. A homeowner just obtained a $90,000 mortgage. >>The mortgage is for 30 years (360 months) and has a >>fixed nominal annual rate of 9 percent, with monthly >>payments. What percentage of the total payments made >>the first two years will go toward repayment of >>interest? >>a. 89.30% >>b. 91.70% >>c. 92.59% >>d. 93.65% >>e. 94.76% >> >>6. You have been offered an investment that pays >>$500 at the end of every 6 months for the next 3 >>years. The nominal interest rate is 12 percent; >>however, interest is compounded quarterly. What is the >>present value of the investment? >>a. $2,458.66 >> >> >>1. As the interest rate decreases (and approaches >>zero), the future value of a series of cash flows (for >>example, $10,000 per year for 15 years): >>a) Approaches the sum of the cash flows >> >> >>2. For positive interest rates, an increase in the >>discount rate _____________ the absolute value of the >>present value of an annuity and _______________ the >>absolute value of the future value of the same >annuity. > >>d) decreases; increases. >> > >> >>3. If you purchased a $10,000 certificate of deposit >>(CD) today with a nominal annual interest rate of 12%, >>with monthly compounding, what would be the CD worth >>when it matures in 6 years? >>a) $20,471 > >> >>4. A Microgates Industries bond has a 10 percent >>coupon rate and a $1,000 face value. Interest is paid >>semiannually, and the bond has 20 years to maturity. >>If investors require a 12 percent yield, what is the >>bond's value and what is the effective annual yield on >>the bond? >> >> >>e) $ 849.54 and 12.36 % >> >>5. You recently purchased a 20-year investment which >>pays you $300 at t=1, $400 at t=2, $500 at t=3, $600 >>at t=4, and some fixed cash flow, X, at the end of >>each of the remaining 16 years. The investment cost >>you $6,737.21. Alternative investments of equal risk >>have a required return of 6 percent. What is the >>annual cash flow received at the end of each of the >>final 16 years, that is, what is X? >> >> >>c) $650 >> >> >>6. BrainDrain software has 14 percent coupon bonds on >>the market with seven years to maturity. The bonds >>make semiannual payments and currently sell for $1050. >>What is the current yield and yield to maturity on >>BrainDrain's bonds? >> >>a) Current Yield = 13.33 % and YTM = 12.89 % >> >> >>7. Bonnie Deep has just purchased a Rolls Royce and >>borrowed $88,477 towards the purchase. The amount is >>to be repaid over a period of 11 years in payments of >>$1,010 each month. What is the Annual Percentage Rate >>(APR) of the loan? >> >> >>d) 8.00% >>

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