DeVry BUSN379 - Week 2 homework es sample

1. This is a sample of the
Week 2 Homework ES Quiz
DeVry BUSN379
I had an A average and barely passed this course!!!
If you study these questions you’ll be learn the material and be much better
prepared than I was.
1. Question :
(TCO 3) You have been approved for a $70,000 loan toward
the purchase of a new home at 10% interest. The mortgage is
for 30 years. How much are the approximately annual
payments of the loan? Hint: Assume you pay yearly.
$7425
$8690
$5740
None of the above
(Chapter 5, pages 132-133)
Answer: $70,000 = C x (1-1/1.10^30)/.10 = C x (1-0.0573)/.10 = C x
9.4269
C = $70,000 / 9.4269 = $7,425
2. Question :
(TCO 3) First Choice Bank pays 9% APR compounded
quarterly on its business loans. National Emerald Bank pays
19% APR compounded semiannually. The EAR for First Choice
and National Emerald Bank are:
9.31% and 19.90%, respectively
9% and 19.50%, respectively
9.31% and 19.50%, respectively
9% and 19.90%, respectively

2. (Chapter 5, page 140)
Answer: EAR = [1 + (APR / m)]m – 1
EAR = [1 + (.09 / 4)]4 – 1= .0931 or 9.31%
EAR = [1 + (.19 / 2)]
2
– 1 = .1990 or 19.90%
3. Question :
(TCO 3) Computer Parts, Inc. is considering an investment
that will have cash flows of $8,000, $7,000 and $4,000 for
years 1 through 3. What is the approximate value of this
investment today if the appropriate discount rate is 10% per
year?
$24,250
$20,900
$16,060
None of the above
(Chapter 5, page 124-126)
Answer: $8,000 / 1.1 + $7,000 / 1.1^2 + $4,000 / 1.1^3 = $16,063
4. Question :
(TCO 3) You deposited $8,000 in your bank account today. An increase
in which of the following will increase the future value of your deposit
assuming that all interest is reinvested? Assume the interest rate is a
positive value. Select all answers that apply:
interest rate
initial amount of your deposit
frequency of the interest payments
None of the above will increase the value of the investment
5. Question :
(TCO 3) If you borrow $50,000 today at 10% interest for eight

3. years. How much of your first payment will be applied towards
the principal of the loan?
$5,000
$4,372
$4,790
zero, all will be applied towards the interest
(Chapter 5, page 130-134)
Answer: First you need to calculate your payment:
$50,000 = C x (1-1/1.10^8)/.10 = C x (1-0.4665)/.10 = C x 5.335
$50,000 / 5.335 = $9,372
Year Payment Principal Paid Interest Paid Remaining Balance
1 9,372 4,372 50,000 x 10% = 5,000.00 45,628
2 9,372 4,809.2 45,628 x 10% = 4,562.8 40,818.8
6. Question :
(TCO 3) Match the following terms with the examples as appropriate:
4
:
Amortized
Loan
» 4 :obtained a 5-year loan from your bank to buy a new
machine. You will pay $500 per month to cover both
interest and principal.
2
: Interest-
only Loan
» 2 :Corporate bonds are usually issued as this form of
loans.
1
: Treasury
Bill
» 1 :is usually a pure discount loan issued by the US
government.
3
: Pure
Discount Loan
» 3 :You borrow $3,000 from your bank at 10% interest. You
will make no payments for two months but will return the
full amount plus interest at the end of three months.
(Chapter 5, pages 144-147)
7. Question :
(TCO 3) You are interested in saving to buy a new machine
that costs $387,120. You can deposit $32,805 in your bank

4. today. If your bank pays 14% annual interest on its accounts,
how long will it take you to save for the new machine?
about 19 years
about 5 years
about 12 years
Can not be determined
(Chapter 4, page 110-111)
Answer: FV = PV(1 + r)t
Solving for t, we get:
t = ln(FV / PV) / ln(1 + r)
FV = $387,120 = $32,805(1.14)t
t = ln($387,120 / $32,805) / ln 1.14
t = 18.84 years
8. Question :
(TCO 3) What are some real-life scenarios where you can
apply the time value of money?
- buying a house or car
- evaluate an investment
- valuate stocks or bonds