9. As the frequency of compounding increases, the future value of any given present amount assuming within a finite time period.

A. becomes smaller.

B. becomes larger.

C. stays the same.

D. discounts.

E. becomes infinite.

__ 10 Which of the following offers the highest return?

A. 12% nominal rate compounded monthly

B. 12.4% nominal rate compounded quarterly

C. 12.8% nominal rate compounded semi-annually

D. 13.0% nominal rate compounded annually

E. More information is needed to determine the best investment.

__ 11. You just found your dream car. The car will cost you $29,700. The dealer will lend you the entire amount at 5.9% interest, compounded monthly, for 60 months. What is the amount of the monthly payment?

A. $426.78

B. $503.19

C. $572.80

D. $604.68

E. $631.34

____12. You just won a prize and will receive $5,000 today plus $5,000 one year from now. What is this prize worth to you today if you can earn 9 percent annually on your investments?

A. $9,174.31

B. $9,587.16

C. $10,000.00

D. $10,450.00

E. $10,900.00

______13.Top Quality Investments will pay you $2,000 a year for 25 years in exchange for $19,000 today. What interest rate are you earning on this annuity?

A. 9.42 percent B. 10.51 percent C. 11.30 percent D. 12.63 percent E. 13.63 percent

____14. You intend to purchase a 10-year, $1,000 face value bond that pays interest of $60 every 6 months. If your nominal annual required rate of return is 10 percent with semiannual compounding, how much should you be willing to pay for this bond?

1. $ 826.31
2. $1,086.15
3. $ 957.50
4. $1,431.49
5. $1,124.62

____15. A $1,000 par value bond pays interest of $35 each quarter and will mature in 10 years. If your nominal annual required rate of return is 12 percent with quarterly compounding, how much should you be willing to pay for this bond?

1. $ 941.36
2. $1,051.25
3. $1,115.57
4. $1,391.00
5. $ 825.49

____16. What is the value of a zero coupon bond with a $1,000 par value and a 6-year maturity, if investors require a 6% return on their investment?

A. $ 564.

B. $ 705.

C. $ 747.

D. $ 837.

E. $1,000.

____17. You just purchased a $1,000 par value, 9-year, 7 percent annual coupon bond that pays interest on a semiannual basis. The bond sells for $920. What is the bonds nominal yield to maturity?

1. 7.28%
2. 8.28%
3. 9.60%

D. 8.67%

E .4.13%

____18. A 9% coupon, bond with fourteen years remaining to maturity is selling now at par. Its yield to maturity (YTM)

A. is 8.36%.

B. is 9.00%.

C. is 9.64%.

D. is impossible to calculate without more information.

E. can only be approximated by the trial-and-error method.

____19. A certain zero coupon bond with a $1,000 par value and 5 years to maturity sells now for $713. The yield to maturity on this bond is

A. 7%.

B. 8%.

C. 9%.

D. 10%.

E. 11%.

____20. Last year, you earned 11.67% on your investments. During that time period, inflation averaged 6.4%. What was your real rate of return based on the Fisher formula (the exact real rate of return)?

A. 4.95%

B. 5.21%

C. 5.51%

D. 5.71%

E. 6.00%