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exam 1 - Solutions to Midterm I FIN 350.03 Spring2008 Form...

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Solutions to Midterm I, FIN 350.03, Spring2008 Form Answer Form Answer A B A B 1 4 D 14 12 E 2 2 E 15 17 D 3 1 D 16 13 B 4 3 B 17 18 A 5 5 B 18 16 B 6 7 A 19 20 A 7 9 C 20 21 D 8 6 C 21 23 B 9 10 D 22 24 B 10 8 C 23 25 A 11 11 C 24 19 C 12 14 A 25 22 E (free credit) 13 15 D Solutions 5. Required annuity payments Answer: b Time line: 0 1 2 3 4 5 Years | | | | | | PV = 1,000 PMT = ? PMT PMT PMT PMT 10% Financial calculator solution: Inputs: N = 5; I/YR = 10; PV = -1000; FV = 0. Output: PMT = $263.80. 6. Quarterly compounding Answer: a Diff: E Time line: 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Qtrs | | | | | | | | | | | | | | | | | | | | | -100 FV = ? 1% Financial calculator solution: Inputs: N = 20; I = 1; PV = -100; PMT = 0. Output: FV = $122.02. 7. PV of an uneven CF stream Answer: c Diff: E Time Line: 0 1 2 3 4 5 6 7 8 9 Years | | | | | | | | | | PV = ? 2,000 2,000 2,000 2,000 2,000 3,000 3,000 3,000 4,000 14% Financial calculator solution:
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Using cash flows Inputs: CF 0 = 0; CF 1 = 2000; N j = 5; CF 2 = 3000; N j = 3; CF 3 = 4000; I = 14. Output: NPV = $11,713.54 $11,714. 8. Monthly loan payments Answer: c Diff: E First, find the monthly interest rate = 0.10/12 = 0.8333%/month. Now, enter in your calculator N = 60; I/YR = 0.8333; PV = -13000; FV = 0; and then solve for PMT = $276.21.
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