QUESTION 1 You’re scheduled to receive $4,500 at the end of each quarter, over the next 3 years. If the annual interest rate is 10%, with quarterly compounding, what is the present value of this strea

QUESTION 1

You’re scheduled to receive $4,500 at the end of each quarter, over the next 3 years. If the annual interest rate is 10%, with quarterly compounding, what is the present value of this stream of cash flows? (Nearest dollar)

1. $47,314

2. $30,662

3. $46,160

4. $96,229

5. $68,132

QUESTION 2

Julie has $2,000 in her bank right now. In addition, she will be making 4 more deposits of $1,000 at the end of each of the next 4 years. If the bank pays 6% per year, compounded annually, how much will Julie have in her account at the end of 4 years? (To the nearest dollar)

1. $10,012

2. $ 6,586

3. $ 6,375

4. $ 6,900

5. $ 4,375

QUESTION 3

A bank paid a stated annual interest rate of 12%, with monthly compounding. What was the equivalent (or "effective") annual rate?

1. 12.36%

2. 12.75%

3. 12.68%

4. 14.40%

5. 6.25%

QUESTION 4

In the "loanable funds" framework, which of the following would be associated with a higher interest rate?

1. a smaller quantity of funds supplied, on a given supply curve

2. a decrease in the expected rate of inflation

3. a rightward shift, or increase, in the supply of funds

4. a leftward shift, or decrease, in the supply of funds

5. a larger quantity of funds demanded, on a given demand curve

QUESTION 5

A security has a nominal interest rate of 9%. If we know that market participants are expecting inflation of 2% per year, what's the real interest rate? (Assuming no other additional factors like liquidity risk, default risk, etc.)

1. 7%

2. 2%

3. 5.5%

4. 9%

5. 11%