FNAN 522 EXAM STUDY GUIDE
COMPREHENSIVE TEST PAPER WITH
SOLVED QUESTIONS
◉ c. $436,332
Answer: If you deposit $16,000 per year for 12 years (each
deposit is made at the end of each year) in an account that pays an
annual interest rate of 14%, what will your account be worth at
the end of 12 years? Round to the nearest dollar.
a. $394,563
b. $518,281
c. $436,332
d. $255,068
◉ b. $831.63
Answer: John and Peggy recently bought a house. They financed
the house with a $125,000, 30-year mortgage with a nominal
annual interest rate of 7 percent with monthly compounding.
Mortgage payments are made at the end of the each month. What
is the monthly mortgage payment?
a. $8,750.00
b. $831.63
,c. $10,073.30
d. $958.62
◉ d. increase the effective annual rate.
Answer: By increasing the number of compounding periods in a
year, while holding the stated annual interest rate constant, you
will...
a. not change the effective annual rate.
b. There is not enough information to answer the question.
c. decrease the effective annual rate.
d. increase the effective annual rate.
◉ d. $25,489.71
Answer: If you wish to accumulate $140,000 in 13 years, how
much must you deposit today in an account that pays an annual
interest rate of 14%?
a. $65,826.64
b. $768,937.61
c. $121,534.23
d. $25,489.71
◉ d. 7.10%
, Answer: A portfolio has $70,000 of bonds and $30,000 of stock.
The bonds are 80% likely to have a 10% return and 20% likely to
have a 0% return. The stock is 50% likely to have a 20% return
and 50% likely to have a 10% loss. What is the expected return?
a. 2.90%
b. 13%
c. 5.90%
d. 7.10%
◉ a. $1,828,293
Answer: You are planning for retirement 24 years from now. You
plan to invest $575 at the end of the month for the following 24
years (assume all cash flows occur at the end of each month). If
you believe you will earn an annual percentage rate of return of
9.7%, what will your retirement investment be worth 34 years
from now? Round to the nearest dollar.
a. $1,828,293
b. $132,086
c. There's not enough information to answer this question.
d. $234,600
◉ b. 7.50%
COMPREHENSIVE TEST PAPER WITH
SOLVED QUESTIONS
◉ c. $436,332
Answer: If you deposit $16,000 per year for 12 years (each
deposit is made at the end of each year) in an account that pays an
annual interest rate of 14%, what will your account be worth at
the end of 12 years? Round to the nearest dollar.
a. $394,563
b. $518,281
c. $436,332
d. $255,068
◉ b. $831.63
Answer: John and Peggy recently bought a house. They financed
the house with a $125,000, 30-year mortgage with a nominal
annual interest rate of 7 percent with monthly compounding.
Mortgage payments are made at the end of the each month. What
is the monthly mortgage payment?
a. $8,750.00
b. $831.63
,c. $10,073.30
d. $958.62
◉ d. increase the effective annual rate.
Answer: By increasing the number of compounding periods in a
year, while holding the stated annual interest rate constant, you
will...
a. not change the effective annual rate.
b. There is not enough information to answer the question.
c. decrease the effective annual rate.
d. increase the effective annual rate.
◉ d. $25,489.71
Answer: If you wish to accumulate $140,000 in 13 years, how
much must you deposit today in an account that pays an annual
interest rate of 14%?
a. $65,826.64
b. $768,937.61
c. $121,534.23
d. $25,489.71
◉ d. 7.10%
, Answer: A portfolio has $70,000 of bonds and $30,000 of stock.
The bonds are 80% likely to have a 10% return and 20% likely to
have a 0% return. The stock is 50% likely to have a 20% return
and 50% likely to have a 10% loss. What is the expected return?
a. 2.90%
b. 13%
c. 5.90%
d. 7.10%
◉ a. $1,828,293
Answer: You are planning for retirement 24 years from now. You
plan to invest $575 at the end of the month for the following 24
years (assume all cash flows occur at the end of each month). If
you believe you will earn an annual percentage rate of return of
9.7%, what will your retirement investment be worth 34 years
from now? Round to the nearest dollar.
a. $1,828,293
b. $132,086
c. There's not enough information to answer this question.
d. $234,600
◉ b. 7.50%
