MATH 320 Practice Test 3

MATH 320 Practice Test 3 -...

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Unformatted text preview: ----.~._-----~----------_..-,II-llPRACTICEMULTIPLECHOICETEST 31.A loan of 1000 is made at an interestrate of 12% compoundedquarterly.Theloan is to berepaidwith three payments:400 at the end of the first year, 800 at the end of the fifth year,and the balanceat the end of the tenth year.Calculatethe amount of the final payment.(A)587~)658/-(C)737(D)777(E)812(E)1073(D)1071(B)1067(A)10652.On January1,1996, Sam invests1000 in a fundfor whichthe force of interestat timetisexpressedby.10(t-1)2, wheretis the numberof yearssince January1,1996.Calculatethe accumulatedvalue of the fund on January1,1998./(f:)10693.You are givenOt=10~t't2::O. Calculatea4j'(A)2.34(CB)2.62(C)2.85(D)3.01~E) 3.23/4.A car dealeroffers to sell a car for 10,000.The currentmarket loan rate is a nominalrate ofinterestof12%perannum,compoundedmonthly.Asaninducement,thedealeroffers100% financingat an effectiveannual interestrate of 5%.The loan is to be repaidin equalinstallmentsat theendof eachmonthovera four-yearperiod.Calculatethecostto thedealer of this inducement.(A)700(B)900(C)1100(D)1300(E)15005.A 30-yearbondhas an annualcouponrate of 6% for the first10 years,7% for the next10years,8% for the last10 years,and maturesat its par valueof-lOO.The bondis boughttoproducean effectiveannualyield rate of 7%.Determinean expressionfor the priceof thebond.(All interestfunctionsare at 7%.)(A)6aiOi+7vlOaiOi+8v20aiOi+ ._u.}QO ",-(B)100~J100 -v2°aiOi+aiOi(D)7a-+100v30301(oE)100+v20 aiOi-aiOi/--~;6.Determinethe presentvalue of 1 payableat the end of years7, 11, IS, 19,23,and 27.f.J'(a28i-a4jsJi+dCC)r",{1,---a28i-a4jsJi+an(B)a28i-a4isJi-an(D)(A)7.You are given the followinginformation:!•i,••••••QaQIQJ.ill••(E)5-:(E) 5Q -4Pz+2CalendarYearof PortfolioRatey+2(D)521f1.SP-4QPortfolioRatesiy+211.00%(C)50(C)4Q -3P(C)8.24%10.00%8.00'Y~1(B)489.00%7.005.00CB)4P +4QInvestmentYear Rates(B)7.96%zz+lz+2A bondwithcouponsequalto 40 sellsforP.A secondbondwiththe same maturityvalueand termhascouponsequalto 30 andsellsforQ.Athirdbondwiththesamematurityvalue and termhas couponsequal to 80. All pricesare basedon the same yield rate, and ancouponsare paid at the same frequency.Determinethe priceof the third bond.(A)4P-4Q(i)The sum of the presentvaluesofapaymentofXat the end of 10 years and a;::2.:.-::-.~:-.:ofYat the end of 20 years is equalto the presentvalueof a paymentofX-;- }'a:::-.=end of 15 years.(ii)X+Y=100(iii)i=5%The followingtablegivesthe patternof investmentyearandportfoliointerestratesoverathree-ye~r period,wherem=2 is the time after whichthe portfoliomethodis applicable.CalendarYearof OriginalInvestmentyAninvestmentof1000 is madeatthebeginningofeachofcalenda,yea:-o::.:: -:.a:1dz+2. Whatis the averageannualeffectivetime-weightedrateof reh.:...-=::'c:- :::= ::.:e=-yea;period?...
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This note was uploaded on 11/18/2010 for the course MATH 320 taught by Professor Dr.k during the Spring '10 term at Nevada.

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MATH 320 Practice Test 3 -...

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