devry busn 379 week 2 homework ES

(TCO 3) You have been approved for a $70,000 loan toward the purchase of a new home at 12% interest. The mortgage is for 30 years. How much are the approximately annual payments of the loan? Hint: Assume you pay yearly.

Student Answer: $2613

$8690

$5740

None of the above

Question 2. Question :

(TCO 3) First Choice Bank pays 9% APR compounded quarterly on its business loans. National Emerald Bank pays 19% APR compounded semiannually. The EAR for First Choice and National Emerald Bank are:

9.31% and 19.90%, respectively

9% and 19.50%, respectively

9.31% and 19.50%, respectively

9% and 19.90%, respectively

Question 3. Question :

(TCO 3) LED Computer Electronics is considering an investment that will have cash flows of $5,000, $6,000, $7,000 and $10,000 for years 1 through 4. What is the approximate value of this investment today if the appropriate discount rate is 9% per year?

Student Answer: $22,250

$30,520

$22,120

None of the above

Instructor Explanation: Chapter 5, page 124-126

Answer: $5,000 / 1.09 + $6,000 / 1.09^2 + $7,000 / 1.09^3 + $10,000 / 1.09^4 = $22,127

Question 4. Question :

(TCO 3) Which of the following will increase the total amount of interest earned on an investment assuming that all interest is reinvested? Select all answers that apply:

increasing the frequency of the interest payments

decreasing the frequency of the interest payments

increasing the interest rate

decreasing the interest rate

Question 5. Question :

(TCO 3) If you borrow $50,000 today at 10% interest for eight years. How much of your second payment will be applied towards the principal of the loan?

$5,000

$4,372

$4,809

can not be determined with the information given

:

Question 6. Question :

(TCO 3) Match the following terms with the examples as appropriate:

Student Answer: : Amortized Loan » 4 : obtained a 5-year loan from your bank to buy a new machine. You will pay $500 per month to cover both interest and principal.

: Interest-only Loan » 2 : Corporate bonds are usually issued as this form of loans.

: Treasury Bill » 1 : is usually a pure discount loan issued by the US government.

: Pure Discount Loan » 3 : You borrow $3,000 from your bank at 10% interest. You will make no payments for two months but will return the full amount plus interest at the end of three months.

Question 7. Question :

(TCO 3) You are interested in saving to buy a new machine that costs $1,105. You can deposit $250 in your bank today. If your bank pays 8% annual interest on its accounts, how long will it take you to save for the new machine?

Student Answer: about 19 years

about 9 years

about 4.5 years

Can not be determined

Question 8. Question :

(TCO 3) Why does money have time value?