1. PVIF(10%, 1)?

a.

0.909

b.

1

c.

1.1

d.

1.21

e.

1.331

2. What is the relationship between

FVIF(r%, N) and PVIF(r%, N)?

a.

PVIF

is greater than FVIF

b.

FVIF

is a sum of PVIF from n=1 to n=N

c.

PVIF

is an inverse of FVIF

d.

PVIF

is used for an annuity

e.

FVIF*PVIF=2.0

3. You want to buy a $15,000 car. If

you borrow money from the dealer, they are willing to give you a 1 year loan

and you need to make a single payment one year from today at zero interest. If

you borrow money from a bank for the same one year period and make a cash

payment to the dealer right now (using the money you borrow from the bank), you

can enjoy a $1,000 discount from a dealer. The bank interest rate is 12% and

you need to make a single payment one year from today to pay off the debt. Which alternative do you like better. Basically, you need to borrow money, either

from the dealer or from the bank. What is the difference between the future

payments of these two choices?

a.

Loan

from the dealer, more than $2,000

b.

Bank,

more than $2,000

c.

Loan

from the dealer, less than $2,000

d.

Bank,

less than $2,000

e.

Equivalent

4. Susie Orman argues that you can

have more money by saving $100 each month (starting at the end of this month

for 12 deposits) instead of saving $1,200 at the end of each year. To check

whether that is true, you are going to compare saving $600 every six months for

a year (starting from 6 months from today for 2 deposits) vis-à-vis $1,200 at

the end of the year. What is the future value of $600 saved every six months

for a year at the end of the first year at 10% APR?

a.

$1,100

b.

$1,135

c.

$1,230

d.

$1,740

e.

$1,200

5. How long does it take to triple

your investment at 6% per year?

a.

7.2

years

b.

10.2

years

c.

12.9

years

d.

14.6

years

e.

18.9

years

6. Which of followings is NOT the

characteristics of a perpetuity?

a.

A

perpetuity continues for a fixed time period.

b.

Value

of a perpetuity can be calculated as “PMT/*i*”

c.

In

a perpetuity, returns are earned in the form of a series of cash flows.

d.

A

perpetuity is a constant infinite stream of identical cash flows.

e.

Real

estate and preferred stock are effectively perpetuities.

7. If an investment of $87,250 is

earning 5% interest rate compounded annually, how long will it take for this

investment to reach a value of $99,750 if no additional withdrawals or no

deposits are being made during the period?

a.

2.47

years

b.

2.52

years

c.

2.74

years

d.

2.61

years

e.

2.83

years

8. If a security of $17,200 is worth

$20,390 three years in the future and assuming that no withdrawals or deposits

are made, what is the implied interest rate that the investor expects to earn

on the security?

a.

4.19%

b.

5.84%

c.

6.78%

d.

7.82%

e.

8.24%

9. Keanu’s financial planner suggested

once he crosses a threshold of $4,991,331 in savings, he will have enough money

for retirement. Keanu has nothing saved for his retirement yet, so he has to

start depositing $85,000 in retirement fund at a fixed rate of 12.00% at the

end of each year. How long will it take for Keanu to retire?

a.

15.64

years

b.

18.40

years

c.

23.00

years

d.

24.84

years

e.

Keanu

will not be able to retire

10. You’ve decided to buy a house that is

valued at $1 million. You have $500,000 as a down payment on the house and you

take out a mortgage for the rest. Your bank is offering you a 30-year standard

mortgage at a fixed nominal rate of 9% or a 15-year mortgage at a fixed nominal

rate of 9%. How much larger must your monthly payment would be?

a.

$1,048.22

b.

$1,205.45

c.

$1,519.92

d.

$1,729.56