**1. (TCO 3) You have been approved for a $70,000 loan toward the purchase of a new home at **

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1. (TCO 3) You have been approved for a $70,000 loan toward the purchase of a new home at 15% interest. The mortgage is for

30 years. How much are the approximately annual payments of the loan? Hint: Assume you pay yearly. (Points : 3)

$7425
$8690
$9203
None of the above
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% and 17.35%, respectively
3. (TCO 3) Computer Parts, Inc. is considering an

investment that will have cash flows of $8,000, $7,000 and $4,000 for years 1 through 3. What is the approximate value of

this investment today if the appropriate discount rate is 10% per year? (Points : 3)
$24,250
$20,900

$16,060
None of the above
4. (TCO 3) You deposited $8,000 in your bank account today. An increase in which

of the following will increase the future value of your deposit assuming that all interest is reinvested? Assume the interest

rate is a positive value. Select all answers that apply: (Points : 4)
interest rate
initial amount of your

deposit
frequency of the interest payments
None of the above will increase the value of the investment

5. (TCO 3) If you borrow $50,000 today at 10% interest for eight years. How much of your first payment will be

applied towards the principal of the loan? (Points : 3)
$5,000
$4,372
$4,790
zero, all will be

applied towards the interest
6. (TCO 3) Match the following terms with the examples as appropriate:
(Points : 4)

Answer Potential Matches:
: Pure discount loan 1 : a promise by the US government to repay a fixed amount at

some time in the future.
: Amortized Loan 2 : You obtained a 5-month commercial loan. This loan loan will allow

you to paid $500 in interest for four months and a final payment of interest and principal at the end of the fifth month.

: Interest-only 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.
: Treasury Bill 4 : You obtained a loan

from your bank to buy a car. You will pay $300 per month to cover both interest and principal.
7. (TCO 3) You are

interested in saving to buy a new machine that costs $387,120. You can deposit $32,805 in your bank today. If your bank pays

14% annual interest on its accounts, how long will it take you to save for the new machine? (Points : 4)
about 19

years
about 5 years
about 12 years
Can not be determined
8. (TCO 3) Why does money have time

value?

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