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FIN 534 Week 4 Quiz 3

Finance
Strayer University
8 pages
Shared May 2025

A quiz assessing financial concepts and market strategies.

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FIN 534 W eek 4 quiz 3 Question 1 Which of the following statements is CORRECT? Correct Answer: Time lines are useful for visualizing complex problems prior to doing actual calculations. Question 2 Which of the following statements regarding a 30 - year monthly payment amortized mortgage with a nominal interest rate of 10% is CORRECT? Correct Answer: A larger proportion of the first monthly payment will be interest, and a smaller proportion will be principal, than for the last monthly payment. Question 3 A U.S. Treasury bond will pay a lump sum of $1,000 exactly 3 years from today. The nominal interest rate is 6%, semiannual compounding. Which of the following statements is CORRECT? Correct Answer: The PV of the $1,000 lump sum has a smaller present value than the PV of a 3 - year, $333.33 ordinary annuity. Question 4 You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would increase the calculated value of the investment? Correct Answer: The discount rate decreases. Question 5
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You are considering two equally risky annuities, each of which pays $5,000 per year for 10 years. Investment ORD is an ordinary (or deferred) annuity, while Investment DUE is an annuity due. Which of the following statements is CORRECT? Correct Answer: A rational investor would be willing to pay more for DUE than for ORD, so their market prices should differ. Question 6 Which of the following statements regarding a 30 - year monthly payment amortized mortgage with a nominal interest rate of 10% is CORRECT? Correct Answer: A smaller proportion of the last monthly payment will be interest, and a larger proportion will be principal, than for the first monthly payment. Question 7 A $150,000 loan is to be amortized over 7 years, with annual end - of - year payments. Which of these statements is CORRECT? Answer Correct Answer: The proportion of each payment that represents interest versus repayment of principal would be higher if the interest rate were higher. Question 8 Which of the following statements is CORRECT? Correct Answer: Time lines can be constructed where some of the payments constitute an annuity but others are unequal and thus are not part of the annuity. Question 9