Week 2 : Time Value of Money - Homework ES
Question 1. 1. (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. (Points : 3)
None of the above
Question 2. 2. (TCO 3) First Choice Bank pays 9% APR compounded quarterly on its business loans. National Emerald Bank pays 16% APR compounded daily. The EAR for First Choice and National Emerald Bank are: (Points : 3)
9.31% and 17.35%, respectively
9% and 17.50%, respectively
9.31% and 17.50%, respectively
9% ...view middle of the document...
Select all answers that apply: (Points : 4)
initial amount of your deposit
frequency of the interest payments
length of the investment period
Question 5. 5. (TCO 3) If you borrow $50,000 today at 10% interest for eight years. How much of your second payment will be applied to interest? (Points : 3)
can not be determined with the information given
Question 6. 6. (TCO 3) Match the following terms with the examples as appropriate:
(Points : 4)
1 : You obtained a business loan for four months. The loan will allow you to paid $300 in interest for three months and a final payment of interest and principal at the end of the four month.
2 : You obtained a mortgage to buy a home. You will pay $800 per month to cover both interest and principal.
3 : a way used by the US government to borrow money on short-term basis.
4 : You borrow $1,000 from your best friend. In return, you will give him back $1150 in 3 months.
: Pure discount loan
: Amortized Loan
: Interest-only Loan
: Treasury Bill
Question 7. 7. (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? (Points : 4)
about 19 years
about 9 years
about 4.5 years
Can not be determined
Question 8. 8. (TCO 3) How can we apply the concept of time value of money in evaluating a mortgage? (Points : 6)