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Suppose an Exxon Corporation bond will pay $4,500 ten years from now. If the going interest rate on safe 10-year bonds is 4.25%, how much is the bond worth today?


A) $2,819.52
B) $2,967.92
C) $3,116.31
D) $3,272.13
E) $3,435.74

F) C) and D)
G) All of the above

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What's the present value of $1,525 discounted back 5 years if the appropriate interest rate is 6%, compounded monthly?


A) $ 969
B) $1,020
C) $1,074
D) $1,131
E) $1,187

F) D) and E)
G) B) and D)

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As a result of compounding, the effective annual rate on a bank deposit (or a loan) is always equal to or less than the nominal rate on the deposit (or loan).

A) True
B) False

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Which of the following investments would have the lowest present value? Assume that the effective annual rate for all investments is the same and is greater than zero.


A) Investment A pays $250 at the end of every year for the next 10 years (a total of 10 payments) .
B) Investment B pays $125 at the end of every 6-month period for the next 10 years (a total of 20 payments) .
C) Investment C pays $125 at the beginning of every 6-month period for the next 10 years (a total of 20 payments) .
D) Investment D pays $2,500 at the end of 10 years (just one payment) .
E) Investment E pays $250 at the beginning of every year for the next 10 years (a total of 10 payments) .

F) B) and D)
G) C) and E)

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