1. If the risk-free rate of interest (rf) is 3.5%, then you should be indifferent between receiving $1000 in one-year or
a. $1,000.00 today.
b. $966.18 today.
c. $965.00 today.
d. $1,035 today.
2. The effective annual rate for a certificate of deposit that pays 3.9% APR compounded monthly is closest to:
a. 3.90%
b. 3.97%
c. 3.83
d. 4.04%
3. If the risk-free rate of interest (rf) is 6%, then you should be indifferent between receiving $250 in one year or
a. $235.85 today.
b. $250.00 today.
c. $265.00 today.
d. None of the above
4. Wesley Mouch's auto loan requires monthly payments and has an effective annual rate of 6.43%. The APR on this auto loan is closest to:
a. 6.50%
b. 6.00%
c. 6.25%
d. 6.62%