Midterm1Spring2009

# Midterm1Spring2009 - Question 1:You are willing to buy a...

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Question 1 :You are willing to buy a \$30,000 car today and the car dealer requires that in addition of \$4,000 down payment, you pay \$500 each month for 5 years. What is the effective annual rate on your car loan. a. 5.78% b. 5.8097% c. 5.90% d. 5.94% Question 2 : Which of the following appears to be most appropriate role for the financial manager? a. Maximizing the profits of the firm b. Maximizing the firm’s market shares c. Making advertisement decision d. Making investment decision Question 3 : After graduating from Illinois and getting a well paid job in Chicago, you decide to buy a BMW and the dealer makes the following offer: A down payment of \$8,000 with a monthly payment of \$800 for the next four years, or a \$42,000 cash immediately. What should be the APR if you are indifferent between the two options? a. 6.10% b. 7.64% c. 8.22% d. 9.15% Question 4 : If the APR remains constant, but the number of compounding periods increases then, a. The PV will remain constant while the effective annual rate will decrease. b. The FV value will increase while the PV will remain constant. c. The PV will decrease while the effective annual rate will increase. d. Both, the FV and the effective annual rate will increase, while the PV will remain constant. Question 5 : After being hired by Microsoft as a financial analyst, you are made the following offer. The first option will give you a salary of \$6,000 at the end of each month, whereas the second option will give you \$4,500 at the end of each month with a bonus of \$20,000 at the end of the year. If the APR is 6%, what should you do? a.

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Midterm1Spring2009 - Question 1:You are willing to buy a...

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