Question1) What is the highest effective rate attainable with a 12 p

1) What is the highest effective rate attainable with a 12 percent nominal rate?

A) 12.00%

B) 12.55%

C) 12.75%

D) 12.95%

2) The future value of a $2,000 annuity due deposited at 8 percent compounded annually for each of the next 10 years is __________.

A) $28,974

B) $31,292

C) $14,494

D) $13,420

3) The present value of a $25,000 perpetuity at a 14 percent discount rate is __________.

A) $178,571

B) $285,000

C) $350,000

D) $219,298

4) A generous philanthropist plans to make a onetime endowment to a renowned heart research center which would provide the facility with $250,000 per year into perpetuity. The rate of interest is expected to be 8 percent for all future time periods. How large must the endowment be?

A) $2,314,814

B) $2,000,000

C) $3,125,000

D) $3,000,000

5) A local bank is offering a zero coupon certificate of deposit for $25,000. At maturity, three years from now, the investor will receive $32,000. What is the rate of return on this investment?

A) 3 percent

B) 6 percent

C) 9 percent

D) 12 percent

6) Entertainer’s Aid plans five annual colossal concerts, each in a different nation’s capital. The concerts will raise funds for an endowment which would provide the World Wide Hunger Fund with $3,000,000 per year into perpetuity. The endowment will be given at the end of the fifth year. The rate of interest is expected to be 9 percent in all future periods. How much must Entertainer’s Aid deposit each year to accumulate to the required amount?

A) $5,569,479

B) $3,333,333

C) $1,830,275

D) $8,568,980

7) The rate of interest agreed upon contractually charged by a lender or promised by a borrower is the __________ interest rate.

A) effective

B) nominal

C) discounted

D) continuous

8) If a United States Savings bond can be purchased for $29.50 and has a maturity value at the end of 25 years of $100, what is the annual rate of return on the bond?

A) 5 percent

B) 6 percent

C) 7 percent

D) 8 percent

9) If a United States Savings bond can be purchased for $14.60 and has a maturity value at the end of 25 years of $100, what is the annual rate of return on the bond?

A) 6 percent

B) 7 percent

C) 8 percent

D) 9 percent

10) The future value of $200 received today and deposited at 8 percent compounded semiannually for three years is __________.

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