Question Details

Which of followings is NOT the characteristics of a perpetuity


1.	Which of followings is NOT the characteristics of a perpetuity?

a.	A perpetuity continues for a fixed time period.
b.	Value of a perpetuity can be calculated as “PMT/i”
c.	In a perpetuity, returns are earned in the form of a series of cash flows.
d.	A perpetuity is a constant infinite stream of identical cash flows.
e.	Real estate and preferred stock are effectively perpetuities.


2.	If a security of $17,200 is worth $20,390 three years in the future and assuming that no withdrawals or deposits are made, what is the implied interest rate that the investor expects to earn on the security?

a.	4.19%
b.	5.84%
c.	6.78%
d.	7.82%
e.	8.24%

3.	You’ve decided to buy a house that is valued at $1 million. You have $500,000 as a down payment on the house and you take out a mortgage for the rest. Your bank is offering you a 30-year standard mortgage at a fixed nominal rate of 9% or a 15-year mortgage at a fixed nominal rate of 9%. How much larger must your monthly payment would be?

a.	$1,048.22
b.	$1,205.45
c.	$1,519.92
d.	$1,729.56
e.	$1,836.69

4.	How long will it take for you to pay off $1,000 charged on your credit card, if you plan to make the 
	minimum payment of $15 per month and the credit card charges 24% per annum? 

a.	10 years
b.	12 years
c.	15 years
d.	17 years
e.	You may not be able to pay off the debt

5.	Which of the following investments would have the lowest present value?  Assume that the effective annual rate for all investments is the same and is greater than zero.

a.	Investment A pays $250 at the end of every year for the next 10 years (a total of 10 payments).
b.	Investment B pays $125 at the end of every 6-month period for the next 10 years (a total of 20 payments).
c.	Investment C pays $125 at the beginning of every 6-month period for the next 10 years (a total of 20 payments).
d.	Investment D pays $2,500 at the end of 10 years (just one payment).
e.	Investment E pays $250 at the beginning of every year for the next 10 years (a total of 10 payments).



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