1. A type of loan that’s paid off by making regular principal reductions, usuall
ID: 2654237 • Letter: 1
Question
1. A type of loan that’s paid off by making regular principal reductions, usually according to a specified schedule, is called a(n) A. annuity due. C. amortizing loan. B. debenture. D. corporate bond
2. On an initial investment of $1,000, you can earn 12 percent interest per year compounded annually, or 12 percent interest per year compounded semiannually. Which of the following statements is correct? A. 12 percent per year, compounded annually, is the better interest rate for the investment. B. 12 percent per year, compounded semiannually, is the better interest rate for the investment. C. There’s no difference between the two interest rates; both rates will produce the same future value. D. It isn’t possible to determine the future value of this investment based on the information provided.
3. What is the future value of a $1,500 investment, earning 10 percent interest per period, after two periods? (Round your answer to the nearest cent.) A. $1,650.00 C. $1,815.00 B. $1,363.63 D. $1,239.67
4. Today, you deposit $6,000 into an account that pays 10 percent annually. In one year, you’ll deposit another $4,000 in the account. How much will you have in the account after two years? A. $10,600 C. $10,000 B. $11,660 D. $11,000
5. What is the present value of $2,200, discounted at 10 percent interest per period, for one period? (Round your answer to the nearest cent.) A. $2,420.00 C. $1,818.18 B. $2,000.00 D. $1,980.00 70
6. Which of the following statements about stock trading is correct? A. The NASDAQ is a computer network, with no physical location for trading. B. The number of NYSE exchange members is unlimited. C. The NASDAQ uses a specialist system for actively traded stocks. D. The NYSE does not have a physical location for stock trading activities.
7. You want to invest money for 3 years in an account that pays 7 percent interest annually. How much would you need to invest today to reach a future goal of $5,000? (Round your answer to the nearest cent.) A. $4,650.00 C. $4,762.90 B. $6,125.22 D. $4,081.49
Explanation / Answer
1.(C) amortizing loan
2. (B) 12 percent per year, compounded semiannually, is the better interest rate for the investment.
3. (C) $1,815.00
4. (B) $11,660
5. (B) $2,000.00
6. (A) The NASDAQ is a computer network, with no physical location for trading.
7. (D) $4,081.49
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