45. What is the present value of the following payment stream, discounted at 8% annually: $1,000 at the end of year 1, $2,000 at the end of year 2, and $3,000 at the end of year 3?

A. $5,022.10

B. $5,144.03

C. $5,423.87

D. $5,520.00

61. If $120,000 is borrowed for a home mortgage, to be repaid at 9% interest over 30 years with monthly payments of $965.55, how much interest is paid over the life of the loan?

A. $120,000

B. $162,000

C. $181,458

D. $227,598

30. How much interest will be earned in the next year on an investment paying 12% compounded annually if $100 was just credited to the account for interest?

A. $88

B. $100

C. $112

D. $200

34 How long must one wait (to the nearest year) for an initial investment of $1,000 to triple in value if the investment earns 8% compounded annually?

A. 9.81 years

B. 14.27 years

C. 22.01 years

D. 25.00 years

42. A furniture store is offering free credit on purchases over $1,000. You observe that a big-screen television can be purchased for nothing down and $4,000 due in one year. The store next door offers an identical television for $3,650 but does not offer credit terms. Which statement below best describes the cost of the "free" credit?

A. 8.75%

B. 9.13%

C. 9.59%

D. 0%

53. A perpetuity of $5,000 per year beginning today is said to offer a 15% interest rate. What is its present value?

A. $33,333.33

B. $37,681.16

C. $38,333.33

D. $65,217.39

67. Assume you are making $989 monthly payments on your amortized mortgage. The amount of each payment that is applied to the principal balance:

A. decreases with each succeeding payment.

B. increases with each succeeding payment.

C. is constant throughout the loan term.

D. fluctuates monthly with changes in market interest rates.

83. An interest rate that has been annualized using compound interest is termed the: A. simple interest rate.

B. annual percentage rate.

C. discounted interest rate.

D. effective annual interest rate.

86. What is the APR on a loan that charges interest at the rate of 1.4% per month?

A. 10.20%

B. 14.00%

C. 16.80%

D. 18.16%

39. Cash flows occurring in different periods should not be compared unless:

A. interest rates are expected to be stable.

B. the flows occur no more than one year from each other.

C. high rates of interest can be earned on the flows.

D. the flows have been discounted to a common date.

56. Which one of the following will increase the present value of an annuity, other things equal?

A. Increasing the interest rate

B. Decreasing the interest rate

C. Decreasing the number of payments

D. Decreasing the amount of the payment

26. Assume a bond is currently selling at par value. What will happen if the bond's expected cash flows are discounted at a rate lower than the bond's coupon rate?

A. The price of the bond will increase.

B. The coupon rate of the bond will increase.

C. The par value of the bond will decrease.

D. The coupon payments will be adjusted to the new discount rate.

29. What happens to a discount bond as the time to maturity decreases?

A. The coupon rate increases.

B. The bond price increases.

C. The coupon rate decreases.

D. The bond price decreases.

34. The current yield of a bond can be calculated by: A. multiplying the price by the coupon rate.

B. dividing the price by the annual coupon payments.

C. dividing the price by the par value.

D. dividing the annual coupon payments by the price.

92. Which one of the following is most apt to be correct for a CCC-rated bond, compared to a BBB-rated bond?

A. The CCC bond will have a variable-coupon rate.

B. The CCC bond will have a shorter term.

C. The CCC bond will offer a higher promised yield to maturity.

D. The CCC bond will have a higher price for the same term.

41. Consider a 3-year bond with a par value of $1,000 and an 8% annual coupon. If interest rates change from 8 to 6% the bond's price will:

A. increase by $51.54.

B. decrease by $51.54.

C. increase by $53.46.

D. decrease by $53.46.

49. If a 4-year bond with a 7% coupon and a 10% yield to maturity is currently worth $904.90, how much will it be worth 1 year from now if interest rates are constant?

A. $904.90

B. $925.39

C. $947.93

D. $1,000.00

54. The yield curve depicts the current relationship between: A. bond yields and default risk.

B. bond maturity and bond ratings.

C. bond yields and maturity.

D. promised yields and default premiums.

67. Investors who purchase bonds having lower credit ratings should expect:

A. lower yields to maturity.

B. higher default possibilities.

C. lower coupon payments.

D. higher purchase prices.

99. The current yield tends to overstate a bond's total return when the bond sells for a premium because:

A. the bond's price will decline each year.

B. coupon payments can change at any time.

C. bonds selling for a premium have low default risk.

D. taxes must be paid on the current yield.

31. What dividend yield would be reported in the financial press for a stock that currently pays a $1 dividend per quarter and the most recent stock price was $40? A. 2.5%

B. 4.0%

C. 10.0%

D. 5.0%

45. Dani's just paid an annual dividend of $6 per share. What is the dividend expected to be in five years if the growth rate is 4.2%? A. $7.07

B. $7.37

C. $7.14

D. $7.44

54. What would be the approximate expected price of a stock when dividends are expected to grow at a 25% rate for 3 years, then grow at a constant rate of 5%, if the stock's required return is 13% and next year's dividend will be $4.00?

A. $67.60

B. $62.08

C. $68.64

D. $73.44