Quiz 2: ECO412, September 23, 2010
Name ____________________________
Multiple Choice Questions: 1 point each. Read each question carefully. Always select the best answer,
especially if more than one appears to be correct.
_____1. The future value of a payment is related to the present value by
a. PV = (1+i)
n
/ FV
n
.
b. FV
n
= PV
/ (1+i).
c. PV = FV
n
+ PV(1+i)
n
.
*
d. FV
n
= PV
* (1+i)
n
.
e. both b and d.
_____2. A coupon bond with a face value of $10,000 is for sale that promises 3 annual coupon payments
of $1,000 each. If the interest rate is 7%, what is the most you would be willing to pay today for
the bond?
a. $13,000.00
b. $12,149.53
*
c. $10,787.29
d. $15,690.37
_____3. Suppose that $1,000 is placed in an interestbearing account and will be left there for 5 years.
The interest rate equals i. How much money will be in the account at the end of this time period?
a. $1000 + 5i
b. $1000(1+5i)
*
c. $1000(1+i)
5
d. $1000 / (1+i)
5
_____4. If the annual interest rate is 6%, the corresponding monthly interest rate is:
a. 0.50%.
*
b. 0.487%.
c. 0.72%.
d. 0.072%.
_____5. When the interest rate falls, holders of bonds will experience a(n):
*
a. increase in the value of the bonds that they are already holding.
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 Spring '05
 Staff
 Balance Sheet, Time Value Of Money, Interest Rate, balance sheet assets

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