# take an equiz

N/A
Welch, Chapter 2, Present Value (A)
1.01 -- not used
Thu Aug 17 21:34:25 2017 = 1503005665

(The equiz numbers refer to the chapter in Welch, Edition 4.)

(Always quote percents as decimal [unless specifically requested otherwise]. That is, for 5%, please answer 0.05 and not 5.)

1 Q02.1

1

Q02.1

You may invest in a project that will return $1,800. If the total holding rate of return is 0.11 (i.e., 11.0%), how much would you have to invest today? Your Answer: (enter only numbers [digits, minus, period]) ±1 1 2 Q02.2 2 Q02.2 You may purchase a stock for$36. It will pay a dividend of $3. If you sell it for$38 just after collecting the dividend, what is your total rate of return?

(enter only numbers [digits, minus, period])

2

3 Q02.3

3

Q02.3

You may purchase a stock for $51. It will pay a guaranteed dividend of$1. If you sell it for $55 after collecting the dividend, then what is your (dollar) capital gain (or loss)? Your Answer: (enter only numbers [digits, minus, period]) 2 4 Q02.4 4 Q02.4 If an asset costs$870 and returns $1,070 in 6 years, then what rate of return per year does it offer? Your Answer: (enter only numbers [digits, minus, period]) 3 5 Q02.5 5 Q02.5 If you buy a Certificate of Deposit (CD) with$1,000 today, offering a true annual holding rate of return of 4.5%, how much will you have in 17 years?

(enter only numbers [digits, minus, period])

±0.5

3

6 Q02.6

6

Q02.6

If you buy a CD with $8,000 today, offering a guaranteed 0.06 (=6.0%) quoted annual interest rate, compounded monthly, how much money will you have in 17 years? Your Answer: (enter only numbers [digits, minus, period]) ±0.5 4 7 Q02.7 7 Q02.7 If a bank savings account with$5,000 will be worth $7,000 in 16 years, and if the interest rate is constant, what is the interest rate quote that the bank would post in its window? (Assume 365 days/year.) Your Answer: (enter only numbers [digits, minus, period]) 4 8 Q02.8 8 Q02.8 You opened a CD account 10 years ago, and the account now has a balance of$12,000. You only made one deposit on the day you opened the account, and never withdrew or deposited again. What was the amount of the original deposit if you collected a constant 8.0% quoted annual rate, compounded monthly?

(enter only numbers [digits, minus, period])

±0.5

3

9 Q02.9

9

Q02.9

A savings account quotes an effective interest rate of 0.11 (i.e., effective APY = 11.0%) per year. How many basis points would you earn per week on a balance in this account? (Assume 52.15 weeks per year.)

(enter only numbers [digits, minus, period])

±0.1

3

10 Q02.10

10

Q02.10

For a $100,000 deposit, a bank offers two choices: • Account A pays interest at a true annual holding rate of return of 5% each year, i.e., compounding annually. • Account B pays a simple non-compounding annual interest rate of 5% per year (for a total interest rate of 25.0%), but pays a one-time bonus of$5,000 at the end of 5 years.
What is the final value of account A minus the final value of account B?