Question 1 (1 point) Under which of the following discounting methods will the p
ID: 2637827 • Letter: Q
Question
Question 1 (1 point)
Under which of the following discounting methods will the present value of an investment be the highest, assuming the same annual interest rate?
Question 1 options:
Yearly
Monthly
Continuous
Quarterly
Question 2 (1 point)
Future value: Larry James is planning to invest $25,200 today in a mutual fund that will provide a return of 0.09 each year. What will be the value of the investment in 10 years?
Your Answer:Question 2 options:
Question 3 (1 point)
The future value of an annuity is typically used when analyzing
Question 3 options:
the price of common stock.
retirement plans.
loan amortization schedules.
alternative capital budgeting proposals.
Question 4 (1 point)
You plan to buy a new car. The price is $30,000 and you will make a down payment of $4,000. Your annual interest rate is 10% and you intend to pay for the car over five years. What will be your monthly payment?
Question 4 options:
$552.42
$566.67
$637.41
$433.33
Question 5 (1 point)
Stanley Roper has $2,400 that he is looking to invest. His brother approached him with an investment opportunity that could give Patrick $4,800 in 4 years. What interest rate would the investment have to yield in order for Stanley
Yearly
Monthly
Continuous
Quarterly
Explanation / Answer
1. Continous
2. Using financial calculater enter PV = 25200, I = 0.09, N = 10, press Fv key, the answer wil be 59657.56
3. retirement plans
4. Present value = 30000- 4000 = 26000
Using financial calculater enter PV = 26000, I = 0.10, N = 5, press PMT key, the answer wil be 6858.73
5. Using financial calculater enter PV = 2400, FV = 4800, N = 4, press I key, the answer wil be 18.92%.
6. future value = $3,125(1.075) + $3,450 (1.075)2 + $3,820 (1.075)3 = 3359.375 + 4414.48 + 4745.57 = $12518.98
7. Using financial calculater enter PV = 4900, I = 0.0125 (0.05/4), N = 8, press Fv key, the answer wil be 5411.98
8. PV = C / (r-g)
= 22000/(0.08 - 0.05) = 733,333