Analyze the political message delivered by your chosen media item. In two well-written paragraphs, explain the background of the image, text, or video and explain what bias the message reveals and how. The background paragraph should include who created the media item, when, for whom, and for what purpose.

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Assessment

Time to put your knowledge of the evolving role of the media in political messages to work! You’ve been asked by a popular news organization to create a web article for their official website that will help the public understand the role that media plays in politics. Your product will first explain your analysis of a media item and then describe how the role of media in politics has changed over time.

Steps

  1. Choose a visual, text, or other media item that is political in nature. This list provides some examples of media items you may use and guidance on where to locate other examples on the Internet. Be sure to include the media item, or directions on how to access it, with your assessment.
  2. Analyze the political message delivered by your chosen media item. In two well-written paragraphs, explain the background of the image, text, or video and explain what bias the message reveals and how.
    • The background paragraph should include who created the media item, when, for whom, and for what purpose.
    • The analysis paragraph should explain the bias in the media item. What strategies does the media item use to persuade people? (examples are symbolism and emotional appeal)
  3. Write a third well-written paragraph that answers the following question, in your own words. How have the media changed over time, and how has this affected political communication?

  4. List

    Select one of the following media items for your assessment. Remember, you must provide the source or information on how to access the source with your assessment.

      1. TV Commercial
        Television advertisements from recent elections are readily available from multiple internet sources, such as the

     Living Room Candidate

      1. . Select this image to see a politcal advertisement:
    A flier paid for by the Economic Freedom Fund© 2011 The
    Associated Press
      1. Political Cartoon
        This political cartoon is from the Civil War era; select this image to see a politcal cartoon:

        The Rail Splitter Repairing the Union'–a political cartoon of Andrew Johnson and Abraham Lincoln from 1865.© 2011 The
        Associated Press

        Political cartoons related to recent political events and issues are accessible from multiple internet sources, such as the

     Cagle Post

      1. .
    1. Debate
      This debate excerpt is from the 2008 presidential campaign:

      • MCCAIN: Somehow in Washington today–and I’m afraid on Wall Street–greed is rewarded, excess is rewarded, and corruption–or certainly failure to carry out our responsibility is rewarded. As president of the United States, people are going to be held accountable in my administration. And I promise you that that will happen.
      • LEHRER: Do you have something directly to say, Senator Obama, to Senator McCain about what he just said?
      • OBAMA: Well, I think Senator McCain’s absolutely right that we need more responsibility, but we need it not just when there’s a crisis. I mean, we’ve had years in which the reigning economic ideology has been what’s good for Wall Street, but not what’s good for Main Street.

        (later)

      • MCCAIN: You’ve got to look at our record. You’ve got to look at our records. That’s the important thing. Who’s the person who has believed that the best thing for America is to have a tax system that is fundamentally fair? And I’ve fought to simplify it, and I have proposals to simplify it. Let Americans choose whether they want the existing tax code or they want a new tax code. Again, look at the record, particularly the energy bill. But, again, Senator Obama has shifted on a number of occasions. He has voted in the United States Senate to increase taxes on people who make as low as $42,000 a year.
      • OBAMA: That’s not true, John. That’s not true.
      • MCCAIN: And that’s just a fact. Again, you can look it up.
      • OBAMA: Look, it’s just not true. And if we want to talk about oil company profits, under your tax plan, John—this is undeniable—oil companies would get an additional $4 billion in tax breaks. Now, look, we all would love to lower taxes on everybody. But here’s the problem: If we are giving them to oil companies, then that means that there are those who are not going to be getting them.
    2. Inaugural Address
      This excerpt is from the opening of President George W. Bush’s Second Inaugural Address:

      “On this day, prescribed by law and marked by ceremony, we celebrate the durable wisdom of our Constitution, and recall the deep commitments that unite our country. I am grateful for the honor of this hour, mindful of the consequential times in which we live, and determined to fulfill the oath that I have sworn and you have witnessed.

      At this second gathering, our duties are defined not by the words I use, but by the history we have seen together. For a half century, America defended our own freedom by standing watch on distant borders. After the shipwreck of communism came years of relative quiet, years of repose, years of sabbatical—and then there came a day of fire.

      We have seen our vulnerability—and we have seen its deepest source. For as long as whole regions of the world simmer in resentment and tyranny—prone to ideologies that feed hatred and excuse murder—violence will gather, and multiply in destructive power, and cross the most defended borders, and raise a mortal threat. There is only one force of history that can break the reign of hatred and resentment, and expose the pretensions of tyrants, and reward the hopes of the decent and tolerant, and that is the force of human freedom.

      We are led, by events and common sense, to one conclusion: The survival of liberty in our land increasingly depends on the success of liberty in other lands. The best hope for peace in our world is the expansion of freedom in all the world.

      America’s vital interests and our deepest beliefs are now one. From the day of our Founding, we have proclaimed that every man and woman on this earth has rights, and dignity, and matchless value, because they bear the image of the Maker of Heaven and earth. Across the generations, we have proclaimed the imperative of self-government, because no one is fit to be a master, and no one deserves to be a slave. Advancing these ideals is the mission that created our Nation. It is the honorable achievement of our fathers. Now it is the urgent requirement of our nation’s security, and the calling of our time.

      So it is the policy of the United States to seek and support the growth of democratic movements and institutions in every nation and culture, with the ultimate goal of ending tyranny in our world.”

Prepare your responses to these assignment problems in a word processing file; put financial data in a spreadsheet file. As you complete the assignment problems for each lesson, add your responses to these files.

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Prepare your responses to these assignment problems in a word processing file; put financial data in a spreadsheet file. As you complete the assignment problems for each lesson, add your responses to these files.

Do not submit your answers for grading until you have completed all parts of Assignment 2.

Note: In assignments, show all calculations to 4 decimal places.

Lesson 5: Assignment Problems

5.1 Assume you have $1 million now, and you have just retired from your job. You expect to live for 20 years, and you want to have the same level of consumption (i.e., purchasing power) for each of these 20 years, after adjusting for inflation. You also wish to leave the purchasing power equivalent of $100,000 today to your kids at the end of the 20 years as a bequest (or to pay them to take care of you).

You expect inflation to be 3% per year for the next 20 years, and nominal interest rates are expected to stay around 8% per year.
A. Calculate the actual amount of consumption, in nominal dollars, using the stated assumptions.
i. How much do you need for your kids?
ii. If you plan to consume $1.03 in year 1, how much will you need to have to keep the same real consumption in year 2? In year 10? In year 20?
iii. How much, in nominal dollars, will $1 of retirement funds earn in year 1? Year 2? Year 10? Year 20?
iv. In an Excel spreadsheet (or in a manual table), calculate the following:
a. annual investment earnings for each year
b. total savings after investment earnings for each year
c. subtract annual consumption from total savings each year
d. by trial and error, or with the Goal Seek command, determine the amount of consumption that will give you exactly $100,000, in today’s purchasing power, at the end of 20 years
Hint: You will need to make your annual consumption column dependent on the inflation rate, your investment earnings will grow at the nominal rate, and the bequest of $100,000 will grow at the inflation rate.
B. Do the calculation again using real rates, and setting inflation to equal 0. If you set up your Excel spreadsheet carefully, you should be able to set the inflation rate to equal 0 and enter the real rate of return as the investment earning rate.

Feel free to use the spreadsheet below to help you answer this question.
i. What is the amount of real consumption in year 1? In year 2? In year 10? In year 20?
ii. Show that this is consistent with your calculation using nominal rates.
iii. How much, in real dollars, does that leave for your kids?
iv. Show that your bequest is consistent with the nominal rate results above.

(30 marks)

 

5.2 A. Linus is 18 years old now, and is thinking about taking a 5-year university degree. The degree will cost him $25,000 each year. After he’s finished, he expects to make $50,000 per year for 10 years, $75,000 per year for another 10 years, and $100,000 per year for the final 10 years of his working career. If Linus lives to be 100, and if real interest rates stay at 5% per year throughout his life, what is the equal annual consumption he could enjoy until that date?
B. Linus is also considering another option. If he takes a job at the local grocery store, his starting wage will be $40,000 per year, and he will get a 3% raise, in real terms, each year until he retires at the age of 53. If Linus lives to be 100, what is the equal annual consumption he could enjoy until that date?
C. From strictly a financial point of view, is Linus better off choosing option A or B?

(10 marks)
5.3 Are you better off playing the lottery or saving the money? Assume you can buy one ticket for $5, draws are made monthly, and a winning ticket correctly matches 6 different numbers of a total of 49 possible numbers.

The probabilities: In order to win, you must pick all the numbers correctly. Your number has a 1 in 49 chance of being correct. Your second number, a 1 in 48 chance, and so on. There are exactly 49 x 48 x 47 x 46 x 45 x 44 = 10,068,347,520 ways to pick 6 numbers from 49 options.

But the order in which you pick them does not matter, so you actually have a few more ways to win. You can pick 6 different numbers in exactly 6 x 5 x 4 x 3 x 2 x 1 = 720 orders of choice. Any one of those orders would still win the lottery.

Putting this all together, your ticket has 720/10,068,347,520 = 1/13,983,816 chance of winning. This equates to a .000000071 percentage chance.

If you played one ticket every month from age 18 to age 65, you would have 47 x 12 = 564 plays. Your odds of not ever winning would be calculated using a binomial distribution to be .9999599568, meaning your chances of winning would be 1 – .9999599568 = .0000400432.

So, if the lottery winnings averaged $10 million over this time period, your expected return would be less than .0000400432 x $10 million = $400.43.

(It’s less than $400.43 because your 564 plays are spread out over the next 47 years, so the present value of these future plays would be significantly less than if you were able to play all 564 immediately. The $400.43 assumes you play all 564 plays today, which makes it the highest possible expected value.)

REQUIRED:
A. What would your $400.43 be worth if you invested it at 1% real interest for 47 years?
B. If, instead, you wrote down your 6 numbers on a piece of paper, and deposited your $5 in a bank at 1% real interest, how much would you have at the end of the first year?
C. If you did this every year for 47 years, how much would you have at age 65?
D. If you earned 5% real interest on your deposits, how much would you have at age 65?
E. Which option would make you better off at age 65? How many times better off?

(10 marks)
5.4 Use the Excel spreadsheet named “LeasevsBuyCCA.xls” to answer the following question. You may choose to answer the question without using the spreadsheet, but be very careful to show all work, so your marker can follow your calculation and award part marks as necessary.

You want to buy a new car, but you’re not sure whether you should lease it or buy it. You can buy it for $50,000, and you expect that it will be worth $20,000 after you use it for 3 years. Alternatively, you could lease it for payments of $650 per month for the 3-year term, with the first payment due immediately. The lease company did not tell you what interest rate they’re using to calculate the monthly payments, but you know you could borrow money from your banker at an annual percentage rate (APR) of 8%.
A. Calculate the present value of the lease payments, assuming monthly compounding at the given APR of 8%.
B. Calculate the present value of the $20,000 salvage value, again using monthly compounding and the given APR of 8%. Which option do you prefer, lease or buy?
C. Calculate the amount of the salvage value which would make you indifferent between leasing and buying.
D. If you were able to use this car 100% for business, rendering the lease payments tax-deductible, or alternatively, allowing you to deduct depreciation using straight-line depreciation (depreciated to expected salvage value) and assuming your tax rate is 40%, would you prefer to buy or lease the car?

(10 marks)

Do not submit these questions for grading until you have completed all parts of Assignment 2, which is due after Lesson 8.

Lesson 6: Assignment Problems

You may find it helpful to use the Excel file named “Chapter 6 template.xls” to answer the following questions. You may choose to answer the questions without using the spreadsheet, but be very careful to show all work, so your marker can follow your calculation and award part marks as necessary.

In order to ensure that you know how the spreadsheet works, it is recommended that you replicate table 6.5 from page 182 of your textbook before proceeding to answer the following questions. (Note that a completed spreadsheet for Table 6.5 is included with the Excel file as a separate worksheet, so you can check your work.)

6.1 You and your friends are thinking about starting a motorcycle company named Apple Valley Choppers. Your initial investment would be $500,000 for depreciable equipment, which should last 5 years, and your tax rate would be 40%. You could sell a chopper for $10,000, assuming your average variable cost per chopper is $3000, and assuming fixed costs, such as rent, utilities and salaries, would be $200,000 per year.
A. Accounting breakeven: How many choppers would you have to sell to break even, ignoring the costs of financing?
B. Financial breakeven: How many choppers would you have to sell to break even, if you required a 15% return? (Hint: Use the 15% as the discount rate and calculate net present value. In Excel, you may want to use the Goal Seek command, or simply use trial and error to find the correct amount.)
C. Assuming you could sell 60 choppers per year, what would be your IRR?
D. Assuming you could sell 60 choppers per year, what would your selling price have to be to generate a net present value of $150,000 at a 15% discount rate?
E. If you could sell 60 choppers in the first year, and your sales volume increased by 5% each year until the end of year 5, what would the net present value be at a 15% discount rate?
F. If you need to invest working capital equal to 10% of the next (coming) year‘s sales revenue, what would be the effect on the net present value of the project? Do you think that working capital investments always reduce the net present value of projects? (Assume a 15% discount rate, and sales volume increases by 5% each year.)

(20 marks)
6.2 Fill in the missing items in the following table. Assume that the real interest rate is 3% per year, and inflation is expected to be constant at 2% per year.

Year Nominal cash flow Real cash flow
0 –100,000 –100,000
1 + 12,000 ?
2 +22,000 ?
3 +15,000 ?
4 +10,000 ?
Net present value ? ?

(10 marks)

Determine the new number of shares outstanding in parts (a) through (d). (Do not round intermediate calculations and round your answers to the nearest whole number. (e.g., 32))  

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Problem 19-4 Stock Splits and Stock Dividends
Roll Corporation (RC) currently has 330,000 shares of stock outstanding that sell for $64 per share. Assuming no market imperfections or tax effects exist, what will the share price be after:

a. RC has a five-for-three stock split? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

New share price $

b. RC has a 15 percent stock dividend? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

New share price $

c. RC has a 42.5 percent stock dividend? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

New share price $

d. RC has a four-for-seven reverse stock split? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

New share price $

e. Determine the new number of shares outstanding in parts (a) through (d). (Do not round intermediate calculations and round your answers to the nearest whole number. (e.g., 32))

a.  New shares outstanding

b.  New shares outstanding

c.  New shares outstanding

d.  New shares outstanding

2. Problem 19-16 Dividend Smoothing
The Sharpe Co. just paid a dividend of $1.80 per share of stock. Its target payout ratio is 40 percent. The company expects to have an earnings per share of $4.95 one year from now.

a. If the adjustment rate is .3 as defined in the Lintner model, what is the dividend one year from now? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Dividend $

b. If the adjustment rate is .6 instead, what is the dividend one year from now? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Dividend $

c. Which adjustment rate is more conservative?

.6

.3

3. Problem 29-16 Mergers and Shareholder Value
Bentley Corp. and Rolls Manufacturing are considering a merger. The possible states of the economy and each company’s value in that state are shown here:

State       Probability      Bentley     Rolls
Boom  .70      $ 290,000   $ 260,000
Recession .30     $ 110,000   $ 80,000
________________________________________

Bentley currently has a bond issue outstanding with a face value of $125,000. Rolls is an all-equity company.

a. What is the value of each company before the merger? (Do not round intermediate calculations.)

Value of Bentley $

Value of Rolls $

________________________________________

b. What are the values of each company’s debt and equity before the merger? (Leave no cells blank – be certain to enter “0” wherever required. Do not round intermediate calculations.)

Equity of  Rolls $

Debt of Rolls

Equity of Bentley $

Debt of Bentley $

________________________________________

c. If the companies continue to operate separately, what are the total value of the companies, the total value of the equity, and the total value of the debt? (Do not round intermediate calculations.)

Value of companies $

Value of equity $

Value of debt $

________________________________________

d.1 What would be the value of the merged company? (Do not round intermediate calculations.)
Merged company value $

d.2 What would be the value of the merged company’s debt and equity? (Do not round intermediate calculations.)

Value of the company
Value of debt $

Value of equity $

________________________________________

e-1. How much would shareholders gain or lose in the merger? (Do not round intermediate calculations. Enter a gain as a positive number and a loss as a negative number.)

Shareholders’ gain or loss $

e-2. How much would bondholders gain or lose in the merger? (Do not round intermediate calculations. Enter a gain as a positive number and a loss as a negative number.)

Bondholders’ gain or loss $

 

4. Problem 29-8 EPS, PE, and Mergers
The shareholders of Flannery Company have voted in favor of a buyout offer from Stultz Corporation. Information about each firm is given here:

Flannery   Stultz
Price–earnings ratio   6.35     12.70
Shares outstanding   73,000     146,000
Earnings $ 230,000   $ 690,000
________________________________________

Flannery’s shareholders will receive one share of Stultz stock for every three shares they hold in Flannery.

a-1 What will the EPS of Stultz be after the merger? (Do not round intermediate calculations and round your final answer to 3 decimal places. (e.g., 32.16))

EPS $

a-2 What will the PE ratio be if the NPV of the acquisition is zero? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

PE

b. What must Stultz feel is the value of the synergy between these two firms? (Do not round intermediate calculations.)

Synergy value $

5. Problem 19-20 Dividends versus Reinvestment
After completing its capital spending for the year, Carlson Manufacturing has $1,000 extra cash. Carlson’s managers must choose between investing the cash in Treasury bonds that yield 8 percent or paying the cash out to investors who would invest in the bonds themselves.

a. If the corporate tax rate is 35 percent, what personal tax rate would make the investors equally willing to receive the dividend or to let Carlson invest the money? (Do not round intermediate calculations.)

Personal tax rate
%

b. Is the answer to (a) reasonable?

Yes

No

c. Suppose the only investment choice is a preferred stock that yields 12 percent. The corporate dividend exclusion of 70 percent applies. What personal tax rate will make the stockholders indifferent to the outcome of Carlson’s dividend decision? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Personal tax rate
%

d. Is this a compelling argument for a low dividend payout ratio?

Yes

No

¬¬¬¬¬¬¬¬

¬Edie’s Health and Beauty Supply has 125,000 shares of stock outstanding with a par value of $1 per share and a market value of $5 a share. The company has retained earnings of $76,500 and capital in excess of par of $340,000. The company just announced a 1-for-5 reverse stock split. What will the par value per share be after the split?

$0.20

$1.00

$2.50

$5.00

$10.00
On March 1, you contract to take delivery of 1 ounce of gold for $495. The agreement is good for any day up to April 1. Throughout March, the price of gold hit a low of $425 and hit a high of $535. The price settled on March 31 at $505, and on April 1st you settle your futures agreement at that price. Your net cash flow is:

$-30.

$-20.

$-15.

$10.

$20.
You purchased 200 shares of ABC stock on July 15th. On July 20th, you purchased another 100 shares and then on July 22st you purchased your final 200 shares of ABC stock. The company declared a dividend of $1.10 a share on July 5th to holders of record on Friday, July 23rd. The dividend is payable on July 31st. How much dividend income will you receive on July 31st from ABC?

$0

$220

$330

$440

$550
The common stock of Winsson, Inc. is currently priced at $52.50 a share. One year from now, the stock price is expected to be either $54 or $60 a share. The risk-free rate of return is 4%. What is the value of one call option on Winsson stock with an exercise price of $55?

$0.39

$0.41

$0.45

$0.48

$0.51
A manager should attempt to maximize the value of the firm by:

changing the capital structure if and only if the value of the firm increases.

changing the capital structure if and only if the value of the firm increases to the benefit of inside management.

changing the capital structure if and only if the value of the firm increases only to the benefits of the debtholders.

changing the capital structure if and only if the value of the firm increases although it decreases the stockholders’ value.

changing the capital structure if and only if the value of the firm increases and stockholder wealth is constant.
Nelson Company had equity accounts in 2008 as follows:

Projected income is $150,000 and 40% of this amount will be paid out immediately as dividends. What will the ending retained earnings account be?

$122,000

$90,000

$242,000

$210,000

$92,000
The Tip-Top Paving Co. has an equity cost of capital of 16.97%. The debt to value ratio is .6, the tax rate is 34%, and the cost of debt is 11%. What is the cost of equity if Tip-Top was unlevered?

0.08%

3.06%

14.0%

16.97%

None of these.
Which one of the following stocks is correctly priced if the risk-free rate of return is 3.6% and the market rate of return is 10.5%?

C

A

B

E

D
An IPO of a firm formerly financed by venture capital is carried out for what primary purposes?

Insiders can sell their shares or cash out

Generate cash to pay down bank indebtedness

To establish a market value for the equity and provide funds for operations

All of the above.

None of the above.
Your firm is considering leasing a new computer. The lease lasts for 9 years. The lease calls for 10 payments of $1,000 per year with the first payment occurring immediately. The computer would cost $7,650 to buy and would be straight-line depreciated to a zero salvage value over 9 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 8%. The corporate tax rate is 30%.

What is the NPV of the lease relative to the purchase?

-$1,039.78

$339.78

$360.22

$6,610.22

None of these
A financial institution has equity equal to one-tenth of its assets. If its asset duration is currently equal to its liability duration, then to immunize, the firm needs to:

decrease the duration of its assets.

increase the duration of its assets.

decrease the duration of its liabilities.

do nothing, i.e., keep the duration of its liabilities equal to the duration of its assets.
Given the following information, leverage will add how much value to the unlevered firm per dollar of debt?
Corporate tax rate: 34%
Personal tax rate on income from bonds: 20%
Personal tax rate on income from stocks: 50%

$-0.050

$-0.188

$0.367

$0.588

None of these
The market portfolio of common stocks earned 14.7% in one year. Treasury bills earned 5.7%. What was the real risk premium on equities?

12.2%

18.7%

9.0%

6.5%

5.0%
You own one call option with an exercise price of $30 on Nadia Interiors stock. This stock is currently selling for $27.80 a share but is expected to increase to either $28 or $34 a share over the next year. The risk-free rate of return is 5% and the inflation rate is 3%. What is the current value of your option if it expires in one year?

$0.76

$0.79

$0.89

$0.92

$0.95
The six components that make up the total costs of new issues are:

the spread; other direct expenses such as filing fees; indirect expenses such as management time; economies of scale; abnormal returns and the Green Shoe option.

the discount; other direct expenses such as filing fees; indirect expenses such as management time; due diligence costs; abnormal returns and the Green Shoe option.

the spread; other direct expenses such as filing fees; indirect expenses such as management time; abnormal returns; underpricing and the Green Shoe option.

the spread; other direct expenses such as filing fees; economies of scale; due diligence costs; abnormal returns and underpricing.

None of the above.
The Telescoping Tube Company is planning to raise $2,500,000 in perpetual debt at 11% to finance part of their expansion. They have just received an offer from the Albanic County Board of Commissioners to raise the financing for them at 8% if they build in Albanic County. What is the total added value of debt financing to Telescoping Tube if their tax rate is 34% and Albanic raises it for them?

$850,000

$1,200,000

$1,300,000

$1,650,000

There is no value to the scheme; Albanic is just conning Telescoping Tube into moving.
Alto and Solo are all-equity firms. Alto has 2,400 shares outstanding at a market price of $24 a share. Solo has 4,000 shares outstanding at a price of $17 a share. Solo is acquiring Alto for $63,000 in cash. The incremental value of the acquisition is $5,500. What is the net present value of acquiring Alto to Solo?

$100

$400

$1,200

$2,400

$5,500
On June 9th, you purchased 3,000 shares of SP stock. On July 5th, you sold 400 shares of this stock for $21 a share. You sold an additional 400 shares on July 18th at a price of $22.50 a share. The company declared a $.30 per share dividend on June 20th to holders of record as of July 10th. This dividend is payable on July 31st. How much dividend income will you receive on July 31st as a result of your ownership of SP stock?

$120

$780

$810

$1,000

It is impossible to calculate with the information given

Firm A is planning on merging with Firm B. Firm A will pay Firm B’s stockholders the current value of their stock in shares of Firm A. Firm A currently has 2,300 shares of stock outstanding at a market price of $20 a share. Firm B has 1,800 shares outstanding at a price of $15 a share. What is the value per share of the merged firm?

$19.00

$19.18

$19.44

$20.00

$20.33
If rates in the market fall between now and one month from now, the mortgage banker:

loses as the mortgages are sold at a discount.

gains as the mortgages are sold at a discount.

loses as the mortgages are sold at a premium.

gains as the mortgages are sold at a premium.

neither gains nor loses.

If you place $50 in a savings account with an interest rate of 7% compounded weekly, what will the investment be worth at the end of five years (round to the nearest dollar)?

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1) At what rate must $400 be compounded annually for it to grow to $716.40 in 10 years?

A) 6%

B) 5%

C) 7%

D) 8%

 

 

2) You just purchased a parcel of land for $10,000. If you expect a 12% annual rate of return on your investment, how much will you sell the land for in 10 years?

A) $25,000

B) $31,060

C) $38,720

D) $34,310

 

 

3) If you place $50 in a savings account with an interest rate of 7% compounded weekly, what will the investment be worth at the end of five years (round to the nearest dollar)?

A) $72

B) $70

C) $71

D) $57

 

 

4) Shorty Jones wants to buy a one-way bus ticket to Mule-Snort, Pennsylvania. The ticket costs $142, but Mr. Jones has only $80. If Shorty puts the money in an account that pays 9% interest compounded monthly, how many months must Shorty wait until he has $142 (round to the nearest month)?

A) 73 months

B) 75 months

C) 77 months

D) 79 months

 

 

5) If you want to have $1,700 in seven years, how much money must you put in a savings account today? Assume that the savings account pays 6% and it is compounded quarterly (round to the nearest $10).

A) $1,120

B) $1,130

C) $1,110

D) $1,140

 

6) If you want to have $1,200 in 27 months, how much money must you put in a savings account today? Assume that the savings account pays 14% and it is compounded monthly (round to the nearest $10).

A) $910

B) $890

C) $880

D) $860

 

 

7) You bought a painting 10 years ago as an investment. You originally paid $85,000 for it. If you sold it for $484,050, what was your annual return on investment?

A) 47%

B) 4.7%

C) 19%

D) 12.8%

 

 

8) You deposit $5,000 today in an account drawing 12% compounded quarterly. How much will you have in the account at the end of 2 1/2 years?

A) $7,401

B) $5,523

C) $7,128

D) $6,720

 

 

9) How many years will it take for an initial investment of $200 to grow to $544 if it is invested today at 8% compounded annually?

A) 8 years

B) 10 years

C) 11 years

D) 13 years

 

 

10) If you purchased a share of Mico.com stock on March 1, 1993 for $45 and you sold the stock at $168 on February 28, 1998, what was your annual rate of return on the stock?

A) 83%

B) 75%

C) 20%

D) 30%

E) 50%