Question 1

A $60,000 loan is taken out on a boat with the terms 7% APR for 36 months.How much are the monthly payments on this loan?

Accepted Answer

A)  $1666.66 
B)  $1783.33 
C)  $1796.54 
D)  $1852.62 
E)  $1901.24 
A)  $1666.66 
B)  $1783.33 
C)  $1796.54 
D)  $1852.62 
E)  $1901.24

Question 2

Corey buys 10 Tufflift 4-post,4.5-ton car hoists for his parking garage at a total cost of $410,000.He finances this with a five-year loan at 6.2% APR with monthly payments.After he has made the first 20 payments,how much is the outstanding principal balance on his loan?

Accepted Answer

A)  $150,969 
B)  $250,698 
C)  $287,153 
D)  $302,284 
E)  $310,104 
A)  $150,969 
B)  $250,698 
C)  $287,153 
D)  $302,284 
E)  $310,104

Question 3

Historically,why have high inflation rates tended to be associated with high nominal interest rates?

Accepted Answer

A)  Individuals will spend more when they expect their investments to increase in value. 
B)  Growth in investment and savings is encouraged when consumers are judged to be overspending. 
C)  High inflation leads to a decrease in purchasing power and thus increases the attractiveness of investment over consumption in the short term. 
D)  The real interest rate needs to be high enough so that individuals can expect their savings to have greater purchasing power in the future than in the present. 
E)  High interest rates mean that savings grow faster, and when people have more money to spend, prices will increase. 
A)  Individuals will spend more when they expect their investments to increase in value. 
B)  Growth in investment and savings is encouraged when consumers are judged to be overspending. 
C)  High inflation leads to a decrease in purchasing power and thus increases the attractiveness of investment over consumption in the short term. 
D)  The real interest rate needs to be high enough so that individuals can expect their savings to have greater purchasing power in the future than in the present. 
E)  High interest rates mean that savings grow faster, and when people have more money to spend, prices will increase.

Question 4

You decide to take out a car loan for $34,575 at 4% APR for 72 months.How much are your monthly payments?

Accepted Answer

A)  $480.21 
B)  $540.93 
C)  $1,470.30 
D)  $549.63 
E)  $499.42 
A)  $480.21 
B)  $540.93 
C)  $1,470.30 
D)  $549.63 
E)  $499.42

Question 5

In which of the following situations would the central bank in a certain country be most likely to lower interest rates?

Accepted Answer

A)  The economy is growing slowly or not at all. 
B)  Inflation is rising rapidly. 
C)  The level of investment is very low. 
D)  The rate of savings is extremely high. 
E)  When the government needs to borrow money more cheaply. 
A)  The economy is growing slowly or not at all. 
B)  Inflation is rising rapidly. 
C)  The level of investment is very low. 
D)  The rate of savings is extremely high. 
E)  When the government needs to borrow money more cheaply.

Question 6

A construction company takes a loan of $280,000 to cover the cost of a new grader.If the interest rate is 8.75%APR,and payments are made monthly for five years,what percentage of the outstanding principal does the company pay in interest each month?

Accepted Answer

A)  0.73% 
B)  7.29% 
C)  8.75% 
D)  9.25% 
E)  10.5% 
A)  0.73% 
B)  7.29% 
C)  8.75% 
D)  9.25% 
E)  10.5%

Question 7

Use the table for the question(s) below.
Suppose the term structure of interest rates is shown below:
  
-Inflation measures

Accepted Answer

A)  how price changes impact interest rates. 
B)  how the purchasing power increases due to increasing interest rates. 
C)  changes in nominal interest rates. 
D)  changes in real interest rates. 
E)  how purchasing power declines due to increasing prices. 
A)  how price changes impact interest rates. 
B)  how the purchasing power increases due to increasing interest rates. 
C)  changes in nominal interest rates. 
D)  changes in real interest rates. 
E)  how purchasing power declines due to increasing prices.

Question 8

Which of the following would be most likely to lower the interest rate that a bank offers a borrower?

Accepted Answer

A)  The number of borrowers seeking funds is high. 
B)  The expected inflation rate is expected to be high. 
C)  The borrower is judged to have a low degree of risk. 
D)  The investment will be for a long period of time. 
E)  The number of savers depositing funds at the bank is low. 
A)  The number of borrowers seeking funds is high. 
B)  The expected inflation rate is expected to be high. 
C)  The borrower is judged to have a low degree of risk. 
D)  The investment will be for a long period of time. 
E)  The number of savers depositing funds at the bank is low.

Question 9

Which of the following statements is true?

Accepted Answer

A)  The interest rates that banks offer on investments or charge on loans is independent of the time horizon of the investment or loan. 
B)  The Bank of Canada determines very short-term interest rates through its influence on the federal funds rate. 
C)  The interest rates that are quoted by banks and other financial institutions are real interest rates. 
D)  Fundamentally, interest rates are determined by the Bank of Canada. 
E)  If interest rates are expected to fall in the future, long-term rates will tend to be higher than short-term rates. 
A)  The interest rates that banks offer on investments or charge on loans is independent of the time horizon of the investment or loan. 
B)  The Bank of Canada determines very short-term interest rates through its influence on the federal funds rate. 
C)  The interest rates that are quoted by banks and other financial institutions are real interest rates. 
D)  Fundamentally, interest rates are determined by the Bank of Canada. 
E)  If interest rates are expected to fall in the future, long-term rates will tend to be higher than short-term rates.

Question 10

The table above shows the interest rates available from investing in risk-free Government of Canada securities with different investment terms.If an investment offers a risk-free cash flow of $100,000 in ten years' time,what is the present value (PV)of that cash flow?

Accepted Answer

A)  $80,051 
B)  $78,320 
C)  $73,512 
D)  $70,892 
E)  $95,102 
A)  $80,051 
B)  $78,320 
C)  $73,512 
D)  $70,892 
E)  $95,102

Question 11

Liam had an extension built onto his home.He financed it for 48 months with a loan at 4.9% APR.His monthly payments were $750.How much was the loan amount for this extension?

Accepted Answer

A)  $32,631 
B)  $34,842 
C)  $36,000 
D)  $38,420 
E)  $37,764 
A)  $32,631 
B)  $34,842 
C)  $36,000 
D)  $38,420 
E)  $37,764

Question 12

Given a real interest rate of 5.8% and an inflation rate of 3.4%,what is the nominal interest rate?

Accepted Answer

A)  9.8% 
B)  2.3% 
C)  3.4% 
D)  5.8% 
E)  9.4% 
A)  9.8% 
B)  2.3% 
C)  3.4% 
D)  5.8% 
E)  9.4%

Question 13

Use the table for the question(s) below.
Consider the following investment alternatives:
  
-The highest effective rate of return you could earn on any of these investments is closest to:

Accepted Answer

A)  6.250% 
B)  6.267% 
C)  6.300% 
D)  6.310% 
E)  6.245% 
A)  6.250% 
B)  6.267% 
C)  6.300% 
D)  6.310% 
E)  6.245%

Question 14

You decide to take out a car loan for $25,000 at 6% APR for 60 months.What is the outstanding principal of your loan after you make your first payment?

Accepted Answer

A)  $24,875.00 
B)  $24,516.68 
C)  $24,641.68 
D)  $24.734.32 
E)  $24,975.14 
A)  $24,875.00 
B)  $24,516.68 
C)  $24,641.68 
D)  $24.734.32 
E)  $24,975.14

Question 15

The effective annual rate (EAR)for a savings account with a stated APR of 4% compounded daily is closest to:

Accepted Answer

A)  4.00% 
B)  4.10% 
C)  4.08% 
D)  4.06% 
E)  4.05% 
A)  4.00% 
B)  4.10% 
C)  4.08% 
D)  4.06% 
E)  4.05%

Question 16

Given the above term structure of interest rates,which of the following is most likely in the future?
Option I Interest rates will rise.
Option II Economic growth will slow.
Option III Long-term rates will fall relative to short-term rates.

Accepted Answer

A)  Option I only 
B)  Option II only 
C)  Option III only 
D)  Options I and II 
E)  Options II and III 
A)  Option I only 
B)  Option II only 
C)  Option III only 
D)  Options I and II 
E)  Options II and III

Question 17

Is it possible to analyze cash flows that occur in time intervals that are not exactly equal to a year?

Accepted Answer

Yes,in the real world cash flows may hav

Question 18

You decide to take out a 25-year mortgage for $350,000 at 5% APR.What are your monthly payments?

Accepted Answer

A)  $2,035.62 
B)  $2,046.07 
C)  $1,166.67 
D)  $2,069.45 
E)  $2,054.11 
A)  $2,035.62 
B)  $2,046.07 
C)  $1,166.67 
D)  $2,069.45 
E)  $2,054.11

Exam 5: Interest Rates

A $60,000 loan is taken out on a boat with the terms 7% APR for 36 months.How much are the monthly payments on this loan?

Corey buys 10 Tufflift 4-post,4.5-ton car hoists for his parking garage at a total cost of $410,000.He finances this with a five-year loan at 6.2% APR with monthly payments.After he has made the first 20 payments,how much is the outstanding principal balance on his loan?

Historically,why have high inflation rates tended to be associated with high nominal interest rates?

You decide to take out a car loan for $34,575 at 4% APR for 72 months.How much are your monthly payments?

In which of the following situations would the central bank in a certain country be most likely to lower interest rates?

A construction company takes a loan of $280,000 to cover the cost of a new grader.If the interest rate is 8.75%APR,and payments are made monthly for five years,what percentage of the outstanding principal does the company pay in interest each month?

Use the table for the question(s) below. Suppose the term structure of interest rates is shown below: -Inflation measures

Which of the following would be most likely to lower the interest rate that a bank offers a borrower?

Which of the following statements is true?

The table above shows the interest rates available from investing in risk-free Government of Canada securities with different investment terms.If an investment offers a risk-free cash flow of $100,000 in ten years' time,what is the present value (PV)of that cash flow?

Liam had an extension built onto his home.He financed it for 48 months with a loan at 4.9% APR.His monthly payments were $750.How much was the loan amount for this extension?

Given a real interest rate of 5.8% and an inflation rate of 3.4%,what is the nominal interest rate?

Use the table for the question(s) below. Consider the following investment alternatives: -The highest effective rate of return you could earn on any of these investments is closest to:

You decide to take out a car loan for $25,000 at 6% APR for 60 months.What is the outstanding principal of your loan after you make your first payment?

The effective annual rate (EAR)for a savings account with a stated APR of 4% compounded daily is closest to:

Given the above term structure of interest rates,which of the following is most likely in the future? Option I Interest rates will rise. Option II Economic growth will slow. Option III Long-term rates will fall relative to short-term rates.

Is it possible to analyze cash flows that occur in time intervals that are not exactly equal to a year?

You decide to take out a 25-year mortgage for $350,000 at 5% APR.What are your monthly payments?

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

The Valuation Principle: the Foundation of Financial Decision Making

The Time Value of Money

Bonds

Valuing Stocks

Investment Decision Rules

Fundamentals of Capital Budgeting

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

Determining the Cost of Capital

Risk and the Pricing of Options

Raising Equity Capital

Debt Financing

Capital Structure

Payout Policy

Financial Modelling and Pro Forma Analysis

Working Capital Management

Short Term Financial Planning

Risk Management

International Corporate Finance

Leasing

Mergers and Acquisitions

Corporate Governance

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