ADMS3530-Midterm-F09-Sol - Name Section ID Professor...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Name Section ID # Professor Alagurajah’s Section A (Fridays, 2.30-5.30 pm), Professor King’s Section G (Internet), Professor Kohen’s Section F (Tuesdays, 2:30-5:30 pm), Professor Li’s Section E (Wednesdays, 2:30-5:30 pm), Professor Okonkwo’s Section B (Tuesdays, 7-10 pm), Professor Patterson’s Section D (Thursdays, 4-7 pm), and Professor Tahani’s Section C (Wednesdays, 7-10 pm). AP/ADMS 3530.03 Finance Midterm Exam Fall 2009 October 25, 2009 Exam - Solution This exam consists of 30 multiple choice questions and carries a total of 100 points . Choose the response which best answers each question. Circle your answer below , and fill in your answers on the bubble sheet . Only the bubble sheet is used to determine your exam score . Please do not forget to write your name and ID # both at the top of this cover page and on the bubble sheet. Also please write the type of your exam (A or B) on the bubble sheet. Please note the following points : 1) Read the questions carefully and use your time efficiently . 2) Choose the answers that are closest to yours, because of possible rounding. 3) Keep at least 4 decimal places in your calculations and final answers, and at least 6 decimal places for interest rates. 4) The 20 “Numerical questions” are worth 4 points each. 5) The 10 “Conceptual questions” are worth 2 points each. 6) Unless otherwise stated, interest rates are annual , and bonds pay semiannual coupons and have a face value (or par value) of $1,000 . 7) You may use the back of the exam paper as your scrap paper. Notations We may denote the PV and FV annuity factors respectively by PVIFA(r,n) and FVIFA(r,n), i.e.: r r n r FVIFA r r n r PVIFA n n 1 ) 1 ( ) , ( ; ) 1 ( 1 ) , ( + +
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
2 Numerical questions (4 points each) 1. Your cousin just came home from a poker tournament in Las Vegas and is now trying to pay off a gambling debt of $5,000. You have agreed to pay off the debt for him today, and in return he has agreed to pay you $250 per month over the next two years with payments beginning immediately. What is the effective annual interest rate you are charging him? A) 19.75% B) 19.86% C) 21.77% D) 22.26% E) 23.45% Answer C 5,000 = 250 x PVIFA (i,24) x (1+i) because it is an annuity due Solve for i using your financial calculator: i = 1.6550% EAR = (1 + i m ) m -1 = (1.01655) 12 -1 = 21.77% 2. Your parents are willing to pay for your MBA degree and want to put aside funds today even though you will not be entering MBA school for another 3 years (from today). If they can earn 4.5% annually on the funds and your MBA school will cost $35,000 at the beginning of each year of the two year program, how much money do they need to set aside today? A) $57,435
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 12

ADMS3530-Midterm-F09-Sol - Name Section ID Professor...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online