1. ABC Bank receives a loan payment of $1,000 principal and interest from a customer. The bank loans the $1,000 to another customer for one year at the rate of 6.25% per annum. The second customer will pay $1,062.50 to the bank. This amount represents the:
c) future value of the loan payment received from the first customer calculated on a simple interest basis.

2. In the future value formula FVT = P (1 + R/M)T x M ; if:
a) M equals two, interest is compounded semi-annually for each year in the period.

3. In the formula FVT = P x eRT, eRT represents:
b) the future value interest factor for an infinitely large number of compounding periods.


4. If you borrow $150,000 for five years at an 11.5% annual rate, compounded monthly, payable at the end of the loan, how much will you have to pay at the end of five years?

5. To calculate the present value of a bond portfolio, we apply a discount rate that represents the (select two):
_____ a) rate of return on the next best alternative investment.
_____ b) reciprocal value of an interest rate on a comparable investment.
_____ c) investor's required rate of return.
_____ d) investor's return on the bond portfolio.
_____ e) risk factor associated with the bond portfolio.

6. XYZ Company is issuing zero-coupon bonds to fund its expansion plans. The bonds have a face value of $100,000 and a maturity of five years. How much would an investor requiring a 10% return be willing to pay today for one of these bonds?