11 May Question(TCO 3) You have been approved for a $70,000 loan toward the purchase of a new home at 12% interest. The mortgage is for 30 years. How much are the approxim
Question
(TCO 3) You have been approved for a $70,000 loan toward the purchase of a new home at 12% interest. The mortgage is for 30 years. How much are the approximately annual payments of the loan? Hint: Assume you pay yearly.
Student Answer: $2613
$8690
$5740
None of the above
Question 2. Question :
(TCO 3) First Choice Bank pays 9% APR compounded quarterly on its business loans. National Emerald Bank pays 19% APR compounded semiannually. The EAR for First Choice and National Emerald Bank are:
9.31% and 19.90%, respectively
9% and 19.50%, respectively
9.31% and 19.50%, respectively
9% and 19.90%, respectively
Question 3. Question :
(TCO 3) LED Computer Electronics is considering an investment that will have cash flows of $5,000, $6,000, $7,000 and $10,000 for years 1 through 4. What is the approximate value of this investment today if the appropriate discount rate is 9% per year?
Student Answer: $22,250
$30,520
$22,120
None of the above
Instructor Explanation: Chapter 5, page 124-126
Answer: $5,000 / 1.09 + $6,000 / 1.09^2 + $7,000 / 1.09^3 + $10,000 / 1.09^4 = $22,127
Question 4. Question :
(TCO 3) Which of the following will increase the total amount of interest earned on an investment assuming that all interest is reinvested? Select all answers that apply:
increasing the frequency of the interest payments
decreasing the frequency of the interest payments
increasing the interest rate
decreasing the interest rate
Question 5. Question :
(TCO 3) If you borrow $50,000 today at 10% interest for eight years. How much of your second payment will be applied towards the principal of the loan?
$5,000
$4,372
$4,809
can not be determined with the information given
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