1. (TCO 3) You have been approved for a $70,000 loan toward the purchase of a ne
ID: 2676497 • Letter: 1
Question
1. (TCO 3) You have been approved for a $70,000 loan toward the purchase of a new home at 10% interest. The mortgage is for 30 years. How much are the approximately annual payments of the loan? Hint: Assume you pay yearly. (Points : 3)$7425
$8690
$5740
None of the above
2. (TCO 3) First Choice Bank pays 9% APR compounded quarterly on its business loans. National Emerald Bank pays 19% APR compounded semiannually. The EAR for First Choice and National Emerald Bank are: (Points : 3)
9.31% and 19.90%, respectively
9% and 19.50%, respectively
9.31% and 19.50%, respectively
9% and 19.90%, respectively
3. (TCO 3) LED Computer Electronics is considering an investment that will have cash flows of $5,000, $6,000, $7,000 and $10,000 for years 1 through 4. What is the approximate value of this investment today if the appropriate discount rate is 9% per year? (Points : 3)
$22,250
$30,520
$22,120
None of the above
4. (TCO 3) Which of the following will increase the total amount of interest earned on an investment assuming that all interest is reinvested? Select all answers that apply: (Points : 4)
increasing the frequency of the interest payments
decreasing the frequency of the interest payments
increasing the interest rate
decreasing the interest rate
5. (TCO 3) If you borrow $50,000 today at 10% interest for eight years. How much of your first payment will be applied towards the principal of the loan? (Points : 3)
$5,000
$4,372
$4,790
zero, all will be applied towards the interest
6. (TCO 3) Match the following terms with the examples as appropriate:
(Points : 4)
Answer Potential Matches:
: Pure discount loan 1 : a promise by the US government to repay a fixed amount at some time in the future.
: Amortized Loan 2 : You obtained a 5-month commercial loan. This loan loan will allow you to paid $500 in interest for four months and a final payment of interest and principal at the end of the fifth month.
: Interest-only Loan 3 : You borrow $3,000 from your bank at 10% interest. You will make no payments for two months but will return the full amount plus interest at the end of three months.
: Treasury Bill 4 : You obtained a loan from your bank to buy a car. You will pay $300 per month to cover both interest and principal.
7. (TCO 3) You are interested in saving to buy a new machine that costs $3,700. You can deposit $1,941 in your bank today. If your bank pays 5% annual interest on its accounts, how long will it take you to save for the new machine? (Points : 4)
about 13 years
about 4.5 years
about 2 years
Can not be determined
8. (TCO 3) Why does money have time value? (Points : 6)
Explanation / Answer
$5740 9% and 19.50%, respectively $22,120 decreasing the frequency of the interest payments $4,372 Amortized Loan 2 : You obtained a 5-month commercial loan. This loan loan will allow you to paid $500 in interest for four months and a final payment of interest and principal at the end of the fifth month. about 2 year
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