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coursefm_0505

# coursefm_0505 - Exam FM May 2005 1 Which of the following...

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Course FM 4 May 2005 1. Which of the following expressions does NOT represent a definition for n a ? (A) ( ) 1 1 n n i v i + (B) 1 n v i (C) 2 n v v v + + + (D) 1 1 n v v v (E) ( ) 1 1 n n s i +

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May 2005 5 Course FM 2. Lori borrows 10,000 for 10 years at an annual effective interest rate of 9%. At the end of each year, she pays the interest on the loan and deposits the level amount necessary to repay the principal to a sinking fund earning an annual effective interest rate of 8%. The total payments made by Lori over the 10-year period is X . Calculate X .
Course FM 6 May 2005 3. A bond will pay a coupon of 100 at the end of each of the next three years and will pay the face value of 1000 at the end of the three-year period. The bond’s duration (Macaulay duration) when valued using an annual effective interest rate of 20% is X . Calculate X .

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May 2005 7 Course FM 4. An estate provides a perpetuity with payments of X at the end of each year. Seth, Susan, and Lori share the perpetuity such that Seth receives the payments of X for the first n years and Susan receives the payments of X for the next m years, after which Lori receives all the remaining payments of X . Which of the following represents the difference between the present value of Seth’s and Susan’s payments using a constant rate of interest?
Course FM 8 May 2005 5. Susan can buy a zero coupon bond that will pay 1000 at the end of 12 years and is currently selling for 624.60 . Instead she purchases a 6% bond with coupons payable semi-annually that will pay 1000 at the end of 10 years. If she pays X she will earn the same annual effective interest rate as the zero coupon bond. Calculate X . (A) 1164 (B) 1167 (C) 1170 (D) 1173 (E) 1176

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May 2005 9 Course FM
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coursefm_0505 - Exam FM May 2005 1 Which of the following...

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