1) Suppose you invest $3,500 today, compounded semiannually, with an annual interest rate of 8.50%. What amount of interest will you earn in one year?
A) $303.82
B) $307.12
C) $309.13
D) $313.82
2) What is the EAR if the APR is 5% and compounding is quarterly?
A) Slightly above 5.09%
B) Slightly below 5.09%
C) Under 5.00%
D) Over 5.25%
3) You put down 20% on a home with a purchase price of $300,000. The down payment is thus $60,000, leaving a balance owed of $240,000. The bank will loan you the remaining balance at 4.28% APR. You will make annual payments with a 20-year payment schedule. What is the annual annuity payment under this schedule?
A) $18,100.23
B) $22,625.29
C) $12,000.00
D) $33,785.23
4) Nominal interest rates are the sum of two major components. These components are ________.
A) the real interest rate and expected inflation
B) the risk-free rate and expected inflation
C) the real interest rate and default premium
D) the real interest rate and the T-bill rate
5) The ________ compensates the investor for the additional risk that the loan will not be repaid in full.
A) default premium
B) inflation premium
C) real rate
D) interest rate