Ch 05 Post-Quiz

# Ch 05 Post-Quiz - 1 OK(Points 1 Which of the following bank...

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1. OK (Points: 1) Which of the following bank accounts has the highest effective annual return? a. An account that pays 9% nominal interest with daily compounding. b. An account that pays 10% nominal interest with annual compounding. c. An account that pays 10% nominal interest with daily compounding. d. An account that pays 9% nominal interest with monthly compounding. e. An account that pays 10% nominal interest with monthly compounding. Save Answer 2. OK (Points: 1) Which of the following statements regarding a 30-year, \$100,000 mortgage with a nominal interest rate of 10%, compounded monthly, is NOT CORRECT? a. The amount paid toward interest in the first payment would be lower if the nominal interest rate were 8%. True b. The total dollar amount of principal being paid off each month gets larger as the loan approaches maturity. True c. Over 90% of the first payment goes toward interest. True: PMT = 877.57, Interest = 100,000*0.1/12 = 833.33. % of interest in first payment = 833.33/877.57 = 95.0% d. The proportion of the monthly payment that represents interest will be lower for the last payment than for the first payment on the loan. True e. The monthly payments will decline over time. False, it stays the same Save Answer 3. OK (Points: 1) A \$10,000 loan is to be amortized over 5 years, with annual end-of-year payments. Given these facts, which of these statements is CORRECT?

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## This note was uploaded on 11/17/2009 for the course FIN 221 taught by Professor Dyer during the Fall '08 term at University of Illinois at Urbana–Champaign.

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Ch 05 Post-Quiz - 1 OK(Points 1 Which of the following bank...

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