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1297354874833_Eco412_quiz2_fall10

# 1297354874833_Eco412_quiz2_fall10 - Quiz 2 ECO412 Name...

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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 interest-bearing 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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