1.
(Points: 1) Which of the following bank accounts has the highest effective annual return?
a. An account that pays 10% nominal interest with monthly compounding.
b. An account that pays 10% nominal interest with daily compounding.
c. An account that pays 9% nominal interest with monthly compounding.
d. An account that pays 10% nominal interest with annual compounding.
e. An account that pays 9% nominal interest with daily compounding.
2.
(Points: 1) Which of the following statements regarding a 30year (360month) $100,000
fixedrate mortgage is CORRECT? (Ignore all taxes and transactions costs.)
a. The outstanding balance gets paid off at a faster rate early in a loan's life, rather than later.
b. Because it is a fixed rate mortgage, the amount paid in interest per payment is constant.
c. The remaining balance after three years will be $100,000 less the total amount of interest paid
during the first 36 months.
d. The proportion of the monthly payment that goes towards repayment of principal will be
higher 10 years from now than it will be this year.
e. The monthly payment on the mortgage will steadily decline over time.
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 Spring '10
 JOSEPHPETRY
 Time Value Of Money, Annuity, fixed rate mortgage

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