SOLUTION: EGN 3615 South Florida Current Market Interest Rate Multiple Choice Questions

Question 115 pts
1 (15 points). A 10-year municipal bond was issued 4 years ago. Its coupon interest
rate is 12% per year, interest payments are made semiannually, and its face value is
\$2500. The current bold holder wants to sell the bond (immediately after the
8th semiannual interest payment). If the current market interest rate is 10.25%/year, what
should be the bond’s price?
Group of answer choices
\$2230
\$2600
\$2720
\$3000
Flag question: Question 2
Question 210 pts
2 (10 points). What amount of money deposited 20 years ago would provide a
perpetual payment of \$30,000 per year beginning this year (The first withdrawal of
\$30,000 takes place at the end of this year.), assuming that the interest is 9% per year?
Group of answer choices
\$59,470
\$63,900
\$67,030
\$70,620
Flag question: Question 3
Question 38 pts
3. Mary Smith took a car loan of \$20,000 to make 60 equal monthly payments. The
interest compounds monthly.
(a) (8 pts). Calculate the monthly payment for Mary, if the nominal interest is 9% per
year.
Group of answer choices
\$444
\$392
\$466
\$415
Flag question: Question 4
Question 44 pts
(b) (4 points). How much interest would Mary pay for taking the loan?
Group of answer choices
\$6640
\$2900
\$2160
\$1320
Flag question: Question 5
Question 58 pts
(c) (8 points). Immediately after making the 20th payment, if she wants to pay off the car
loan, how much does she need to pay?
Group of answer choices
\$13110
\$13775
\$14295
\$14925
Flag question: Question 6
Question 65 pts
4. A debt of \$25,000 must be repaid in a series of equal payments for 5 years. The
nominal annual interest rate is 6%.
a (5 pts).
equal to
If interest is compounded monthly, the amount of payment per month is
Group of answer choices
\$483
\$467
\$440
\$410
Flag question: Question 7
Question 75 pts
b (5 pts). Using the pay schedule in (a), the total interest paid on this debt is
Group of answer choices
\$3140
\$3320
\$3560
\$3980
Flag question: Question 8
Question 810 pts
c (10 pts). If interest is compounded every 6 months, the amount of semi-annual
payment is
Group of answer choices
\$2883
\$2930
\$3560
\$3980
Flag question: Question 9
Question 98 pts
5.
Given the data in the table below, choose the better alternative, if i is 12% per year.
Alternative
A
B
Initial Cost
\$10,000 \$9,000
Annual Benefits
\$5,700 \$6,000
Annual Expenses
\$3,000 \$2,000
Salvage Value
\$1,200 \$1,300
Useful Life in Years 6
3
(a) (8 points) Calculate the present worth of Alternative A.
Group of answer choices
\$2766
\$2295
\$1943
\$1708
Flag question: Question 10
Question 1010 pts
(b) (10 points) Calculate the present worth of Alternative B.
Group of answer choices
\$1695
\$2021
\$2315
\$2625
Flag question: Question 11
Question 112 pts
(c) (2 points) Which alternative should be selected and why?
Group of answer choices
Choose either alternative.
Choose neither alternative.
Choose Alternative A.
Choose Alternative B.
Flag question: Question 12
Question 1215 pts
6 (15 points). What amount of money (at present time) will provide perpetual annual
cash flows (starting one year from now): \$20000, \$25000, \$30000, \$20000, \$25000,
\$30000, \$20000, \$25000, \$30000, ……. ? Assume that the interest is 10% per year.
Group of answer choices
\$216,620
\$255,220
\$293,660
\$318,180

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