Objective type question on time value of money
1. A loan disclosure, as required by law, states that a credit card has an interest rate of 18.2 percent. Interest is compounded on a quarterly basis. What is the effective annual rate?
a) 16.84 percent
b) 16.96 percent
c) 17.08 percent
d) 19.48 percent
e) 19.64 percent
2. What is the present value of $1,200 received at the end of each year for eight years starting in year 4 and ending in year 11 if the discount rate is 10 percent?
a) $3,975.08
b) $4,372.59
c) $4,809.85
d) $6,183.65
e) $6,401.91
3. A preferred stock pays an annual dividend of $5. If you want to earn 11 percent on this investment, what is the maximum amount you should pay to purchase one share of this stock today?
a)$22.73
b) $45.45
c) $66.67
d) $90.91
e) $181.82