Home / Questions / Ford has his eye on a new boat that costs $85,000 but his saving is only $24,000 today. Ap...
Ford has his eye on a new boat that costs $85,000 but his saving is only $24,000 today. Approximately how long will Ford need to wait to purchase the boat if his saving earns 4% interest?
a. 
7 years 

b. 
26 years 

c. 
32 years 

d. 
16 years 

e. 
19 years 
A couple borrows $200,000 for a mortgage that requires fixed monthly payments over 30 consecutive years. The first monthly payment is due in one month. If the interest rate on the mortgage is 5%, which of the following comes closest to the monthly payment?
a. 
$ 1,199 

b. 
$ 955 

c. 
$ 1074 

d. 
$ 1,331 

e. 
$ 843 
The U.S. Treasury Bill will pay to the holder the amount of $10,000 at the end of six months. Which of the following is closest to todayâs price of the Treasury Bill if the interest rate is 5%?
a. 
$ 9,806 

b. 
$ 9,853 

c. 
$ 9,713 

d. 
$ 9,667 

e. 
$ 9,759 
Farmer DJ knows that feeding a grain supplement to his cows will produce more milk according to the schedule given below. {Note: the number on the top is the total pounds of supplement used and the number on the bottom is the total pounds of milk produced. For example, one pound of supplement produces 5 pounds of milk, two pounds of supplement produces 8 pounds of milk, and so on.} Total Pounds Of Supplement Used.....1.....2.....3.....4.....5 Total Pounds of Milk Produced..........5.....8.....10....11...11.5 Ignoring all other issues, how many pounds of supplement should Farmer DJ feed his cows if the price of milk is $0.20 per pound and the price of grain supplement is $1.05 per pound?
a. 
3 

b. 
0 

c. 
1 

d. 
4 

e. 
2 
Suppose that Firm ABC has a bond trading with 8 years remaining till maturity and with a coupon rate of 5%. The bond will return its face value of $1,000 at maturity. Suppose that the bondâs yield to maturity, originally at 5%, just increased to 6%. In this case, what would happen to the bondâs price?
a. 
The bondâs price would rise above its par value 

b. 
The bondâs price would fall by 1% 

c. 
The bondâs price would be equal to its par value 

d. 
The bondâs price would rise by 1% 

e. 
The bondâs price would fall below its par value 
Which of the following comes closest to the value at the end of year 6 of investing $600 today (year 0) and then investing another $600 at the end of year 5 if the interest rate is 5%?
a. 
$ 1,334 

b. 
$ 1,542 

c. 
$ 1,487 

d. 
$ 1,434 

e. 
$ 1,383 
A market for the trading of assets is established by individuals buying and selling shares from inventory. These individuals stay in business by earning a commission equal to the difference between the price the buyer of the shares pays and the price the seller of the shares receives. What do we call this type of market?
a. 
An asymmetrical market 

b. 
A real asset market 

c. 
A liquid market 

d. 
An inefficient market 

e. 
A dealer market 
Limerick currently pays a dividend of $1.50 per share. Which comes closest to Limerickâs price per share if we assume that their dividend grows by 8% for two consecutive years, and then grows by 5% each year (starting in year 3) thereafter forever? Use a required rate of return of 10%.
a. 
$ 54.49 

b. 
$ 41.23 

c. 
$ 24.19 

d. 
$ 33.28 

e. 
$ 27.98 
An inheritance offers the amount of $100 in one year but then grows that amount by a constant rate of 5% forever. Which of the following comes closest to the present value of the inheritance if the bondâs required rate of return is 10%?
a. 
$ 1,667 

b. 
$ 3,333 

c. 
$ 1,429 

d. 
$ 2,500 

e. 
$ 2,000 
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