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?
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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?
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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
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Flag question: Question 4
Question 44 pts
(b) (4 points). How much interest would Mary pay for taking the loan?
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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?
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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
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Flag question: Question 7
Question 75 pts
b (5 pts). Using the pay schedule in (a), the total interest paid on this debt is
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Flag question: Question 8
Question 810 pts
c (10 pts). If interest is compounded every 6 months, the amount of semi-annual
payment is
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Flag question: Question 9
Question 98 pts
Given the data in the table below, choose the better alternative, if i is 12% per year.
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
(a) (8 points) Calculate the present worth of Alternative A.
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Flag question: Question 10
Question 1010 pts
(b) (10 points) Calculate the present worth of Alternative B.
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Flag question: Question 11
Question 112 pts
(c) (2 points) Which alternative should be selected and why?
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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.
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