ADMS3530-Midterm-W10-So

ADMS3530-Midterm-W10-So - Name Section ID # Professor...

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1 Name Section ID # Professor Alagurajah’s Section M (Thursdays, 4-7 pm), Professor Ho’s Sections R (Fridays, 2:30-5:30 pm) and S (Mondays, 2:30-5:30 pm), Professor King’s Sections P (Mondays, 7- 10 pm) and O (Internet), Professor Kohen’s Section T (Wednesdays, 7-10 pm), Professor Pestano’s Section Q (Wednesdays, 4-7 pm), and Professor Tahani’s Section N (Tuesdays, 7-10 pm). AP/ADMS 3530.03 Finance Midterm Exam Winter 2010 February 21, 2010 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 ) , ( + +
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TYPE A TYPE A Answer Keys TYPE B TYPE B Answer Keys Corresponding in A 1C 1B 6 2C 2D 7 3E 3C 8 4B 4E 9 5D 5E 1 0 6B 6C 1 7D 7C 2 8C 8E 3 9E 9B 4 10 E 10 D 5 11 D 11 B 16 12 C 12 D 17 13 D 13 D 18 14 D 14 C 19 15 D 15 D 20 16 B 16 D 11 17 D 17 C 12 18 D 18 D 13 19 C 19 D 14 20 D 20 D 15 21 B 21 C 26 22 E 22 C 27 23 E 23 E 28 24 A 24 E 29 25 A 25 E 30 26 C 26 B 21 27 C 27 E 22 28 E 28 E 23 29 E 29 A 24 30 E 30 A 25
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2 Numerical questions (4 points each) 1. You want to buy a house that costs (before down payment) $450,000. You make a 10% down payment and finance the rest with a 30-year mortgage. The mortgage has a five year renewal term for which the annual mortgage rate is 5.20% (APR compounded semi-annually). What will the remaining principal of the loan be at the end of the 5-year term if you are making monthly payments? A) $272,400 B) $310,450 C) $372,662 D) $372,947 E) $414,068 Answer C The monthly interest rate is given by: (1 + i m ) 12 = 1 + EAR = (1 + 2.60%) 2 = 1.052676, that is i m = 0.4287% The monthly payment for the 30-year loan: 405,000 = PMT x PVIFA(0.4287%,360) Î PMT = $2,210.01 Mortgage remaining at the end of 5 years, i.e. 300 months remaining: PV = $2,210.01 x PVIFA(0.4287% , 300) = 372,661.65 2. In four years from today, the following cash flow stream will have a future value of $5,104.64: $100 today, $500 at the end of one year, $800 at the end of two years, “X” at the end of three years, and $2,000 at the end of four years. The annual interest rate is 6%. What is X?
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ADMS3530-Midterm-W10-So - Name Section ID # Professor...

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