Angie just won the lottery. The prize is yearly payments of $100,000 compounded
ID: 2613616 • Letter: A
Question
Angie just won the lottery. The prize is yearly payments of $100,000 compounded annually for 30 years with the first payment being made today. What is the value of this prize today at an 8% interest rate?
$1,125,778.33
$1,215,840.60
$1,271,650.59
$1,280,128.26
What is the present value of $10,000 to be received in 5 years at 12%?
$5,674.27
$8,928.57
$17,623.42
none of the above
Your are given the following information:
Hotel X
Return: 10%
Weight (proportion of portfolio): 75%
Risk (standard deviation of return): 3%
Hotel Y
Return: 20%
Weight (proportion of portfolio): 25%
Risk (standard deviation of return): 9%
Calculate the standard deviation of the portfolio with a of 0.
4.5%
3.18%
0%
none of the above
If asset x has a standard deviation of 10 percent, and the market portfolio has a standard deviation of 20 percent, and the correlation of their returns is .5, what is the beta?
1.0
.5
.25
0
Given a two-year loan of $50,000 and an annual interest rate of 8 percent, how much interest will accrue during the life of the loan? (Assume no principal payments during the term.)
$4,000
$8,000
$400
None of the above
$1,125,778.33
$1,215,840.60
$1,271,650.59
$1,280,128.26
Explanation / Answer
Answer: to the first distinct question:
a) Present Value of the Prize (annuity due) = Annuity * [{1-(1+i)-n/i] *(1+i), where i = interest rate, n = no of periods
= $100,000 [{1-(1+0.08)-30}/0.08] * (1+0.08)
= $100,000 (0.900623/0.08) * 1.08 = $1,215,840.60
b) PV of an amount= Amount/(1+i)n where i =interest rate, n = no of periods
= $10,000/(1+0.12)5 = $10,000/1.76234 = $5,674.27 (ans)
=