5) If Cathy deposits $12,000 into a bank account that pays 6% interest compounde

Question

5) If Cathy deposits $12,000 into a bank account that pays 6% interest compounded quarterly, what will the account balance be in seven years? A) 18,001 B) 18,207 C) 19,112 D) 19,344

6) Andre's wonderful parents established a college savings plan for him when he was born. They deposited $50 into the account on the last day of each month. The account has earned 10.9% compounded monthly, tax-free. How much can they withdraw on his 18th birthday to spend on his education? A) $27,560 B) $30,028 C) $33,307 D) $43,730

7)What is the value on 1/1/13 of the following cash flows? Date Cash Received Amount of Cash 1/1/14 $14,000 1/1/15 $20,000 1/1/16 $30,000 1/1/17 $43,000 1/1/18 $57,000 Use a 7% discount rate, and round your answer to the nearest $10. A) $153,270 B) $128,490 C) $112,350 D) $107,330

8) The category of securities with the highest historical risk premium is

A) large company stocks. B) small company stocks. C) government bonds. D) small company corporate bonds

9) Wendy purchased 800 shares of Genetics Stock at $3 per share on 1/1/12. Wendy sold the shares on 12/31/12 for $3.45. Genetics stock has a beta of 1.9, the risk-free rate of return is 4%, and the market risk premium is 9%. Wendy's holding period return is

A) 15.0%. B) 16.5%. C) 17.6%. D) 21.1%

10) The prices for the National Gasworks Corporation for the second quarter of 2012 are given below. The price of the stock on April 1, 2012 was $130. Find the holding period return for an investor who purchased the stock on April 1, 2012 and sold it the last day of June 2012. Month End Price April $125.00 May 138.50 June 132.75

A) -4.2% B) -3.7% C) 2.1% D) 3.7%

Explanation / Answer

5)Interest rate per quarter= 6 / 4 = 1.5%

Total Quarters    = 7 * 4 = 28

Future value = deposit * FVF@ 1.5%,28

                   = 12000 * 1.51722

                   = 18207

correct option is "B" - 18207

6)Interest rate = 10.90 /12 = .90833%

months = 18 *12 = 216

Future value =cash flow *FVAF@.90833%,216

                  = 50 * 666..14

                  = 33307

correct option is "C" - 33307

7)present value = (14000* .93458 ) +(20000* .87344)+(30000*.81630)+(43000*.76290)+(57000.71299)

                       = 13084.12 + 17468.8+ 24489+ 32804.7+ 404640.43

                      = 128487.05

correct option is "B" - 128490 (approx)

8)correct option is "A" -large company stock

9) Investment = 3 *800 = 2400

Holding return =[ 800(3.45 -3 ) ] / 2400

                     = 800 * .45 / 2400

                    = 360 / 2400

                  = 15%

correct option is "A"

10) Holding return = (132.75 -130 ) / 130

                         = 2.75 / 130

                         = .021 or 2.1%

correct option is "C" - 2.1%

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