Question

9.You want to have $3,000 in 5 years. You invest your money today and earn 10.6% per annum compounding monthly for the first 2 years and 7.9% per annum compounding quarterly thereafter. If there have been no withdrawals, how much do you need to invest today? (answer to two decimal places; no comma separators)

10.

The approximate nominal rate of interest on a bond with a real rate of 2.90% p.a. and expected inflation of 0.50% p.a. is closest to:

Select one:

A. 3.40%

B. 2.40%

C. 1.25%

D. 2.38%

11.A bond offers a nominal rate of interest is 13.6% per annum. If expected inflation is 1.1% per annum, the real rate of interest per annum, according to the exact Fisher equation, is closest to (in percentage to nearest two decimal places; do not use the percentage sign eg 2.881% is 2.88):

12.

A monetary strategy which involves negative interest rates, is likely to:

Select one:

A. Increase the funds that households save/lend

B. Increase the demand for funds by borrowers/spenders

C. Increase the rate of inflation

D. All of the above

13.

1. For the following equation:    A=B(1+rt), if B=1,000 r=7% and t= 4, the value of A is closest to:

Select one:

a. 1280

b. 1000

c. 29000

d. 1028

Which of the following options most accurately represents how we can insert a row into a worksheet in Excel?

Select one:

a. Select a row in the worksheet by clicking on the row label to select it and then right-click on the mouse and select insert from the menu list.

b. Place the cursor on a cell or row label, (above which you require the new row) and click on the Home menu option Insert>Insert Sheet rows menu button

c. Select a row in the worksheet by clicking on the row label to select it and then press Ctrl Shift and + (CTRL, SHIFT = in Mac) at the same time.

d. All of the above options are correct

18.You invested $6,000 in a savings deposit 7 quarters ago and it has grown to $6672 today. What nominal rate of annual interest (compounding quarterly) did you earn? (expressed as a percentage to two decimal places; don’t use the % sign)

Answer 1

Present value = Future value/(1+i)^n

i = interest rate per period

n= number of periods

9)

Present value = 3000/(1+0.106/12)^24 * (1/(1+0.079/4)^36)

= 1201.38

10)

nominal rate = real rate + interest rate

= 2.9% + 0.5%

= 3.4%

11)

(1+nominal rate) = (1+ real rate) * (1+inflation rate)

=>

real rate = (1+0.136)/(1+0.011) - 1

= 12.36%

12)

D) All of the above

13)

A = 1000 * (1+0.07*4)

= 1280

14)

d. All of the above options are correct

18)

6000 = 6672/(1+r/4)^7

=>

annual interest rate

= 6.11%