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Investment
1. Question 1 (Multiple Choice Worth 4 points)
Sarah knows that she needs $62,000 for a 25% down payment on a house she can afford. She
found an investment that earns 1.25% interest compounding monthly. How much should she put in
the account now, rounded to the nearest dollar, to ensure she has the down payment amount in 5
years?
$58,246
$54,722
$17,993
$29,423
Question 2 (Multiple Choice Worth 4 points)
Marlon has just won some money on a game show! He has the option to take a lump sum payment
of $625,000 now or get paid an annuity of $4,500 per month for the next 15 years. Assuming the
growth rate of the economy is 3.9% compounding annually over the next 15 years, which is the
better deal for Marlon and by how much?
Lump Sum: by $299,464.04
Lump Sum: by $20,387.02
Annuity: by $185,000.00
Annuity: by $20,387.02
Question 3 (Multiple Choice Worth 4 points)
Lynne is 25 years old and starting an IRA (individual retirement account). She is going to invest $150
at the beginning of each month. The account is expected to earn 5.5% interest, compounded
monthly. How much money, rounded to the nearest dollar, will Lynne have in her IRA if she wants to
retire at age 65?
$129,846
$131,036
$261,156
$262,353
Question 4 (Multiple Choice Worth 4 points)
Rachel purchased a five-year $4,750 bond below par value for $3,940 with a coupon of 2.9%. What
was her yield?
2.4%
3.5%
3.4%
2.9%
Question 5 (Multiple Choice Worth 4 points)
List the following stocks and bonds in order from lowest default risk to highest default risk:



A corporate bond in a 150-year old firm with good business practices
A bond in an unstable foreign government
A preferred stock in a developing company with high prospects
corporate bond, preferred stock, foreign government bond
bond, foreign government bond
preferred stock, corporate
corporate bond, foreign government bond, preferred stock
preferred stock, foreign government bond, corporate bond
Question 6 (Multiple Choice Worth 4 points)
Bowen purchases 80 shares of a stock for $31.96. In 6 years, he sells the stock for $2,743.31. He
calculates his ROI, shown below. Did he do this correctly? If not, what error did he make?
Yes, he solved it correctly.
have a negative ROI.
No, he divided by the wrong number.
No, he should
No, he incorrectly calculated his initial investment.
Question 7 (Multiple Choice Worth 4 points)
Advertising. I know I have to write about advertising. What do I know about advertising? I know you
have to market a product to a specific audience. Advertising is used to sell things like soft drinks or
cars. I think I need to narrow down my choices of what to advertise. Advertisements can be written,
heard, or seen. Should I have a visual advertisement on a new brand of energy drink?
Which prewriting strategy is shown above?
Brainstorming
Freewriting
Clustering
Journalist Questions
Question 8 (Multiple Choice Worth 4 points)
Lucas purchased 90 shares of stock in a computer company at $87.92 per share and Peyton
purchased 55 shares of stock in a different computer company for $72.03 per share. After holding
the stock for two years, Lucas sold his for a total of $8,476.20, and Peyton sold hers for a total of
$4,192.10. Which person had a higher ROI and by how much?
Lucas: 1.3% more
Peyton: 1.3% more
Peyton: 5.8% more
Lucas: 7.1% more
Question 9 (Multiple Choice Worth 4 points)
Jeremiah’s investment portfolio is shown below. What is his weighted mean ROR?
Investment
Amount Invested
ROR
Money Market Account $3,200
1.85%
Government Bond
$4,800
-0.8%
Preferred Stock
$7,600
11.9%
Common Stock A
$1,500
2.1%
3.76%
5.59%
6.04%
4.16%
Question 10 (Multiple Choice Worth 4 points)
Karen opens a savings account with $1500. She deposits $100 every month into the account that
has a 0.85% interest rate, compounded annually. If she doesn’t withdraw any money, what will the
account balance be in 10 years?
$14,102.05
$14,208.04
$12,575.55
Question 11 (Multiple Choice Worth 4 points)
ROR
12.2%
Portfolio 1 Portfolio 2 Portfolio 3
$300
$12,000
$2,000
-41.3% $3,000
$4,500
$7,050
27.8%
$1,800
$3,000
$1,250
3.9%
$2,200
$10,000
$750
2.1%
$900
$5,500
$2,250
$12,469.56
Calculate the weighted mean of the RORs for each portfolio. Based on the results, which list shows
a comparison of the overall performance of the portfolios, from worst to best?
Portfolio 3, Portfolio 1, Portfolio 2
Portfolio 1, Portfolio 3
Portfolio 3, Portfolio 2, Portfolio 1
Portfolio 2,
Portfolio 1, Portfolio 3, Portfolio 2
Question 12 (Multiple Choice Worth 4 points)
Jill starts to save at age 25 for a vacation home that she wants to buy for her 50th birthday. She will
contribute $2500 each year to an account, which earns 1.3% annual interest, compounded quarterly.
What is the future value of this investment, rounded to the nearest dollar, when Jill is ready to
purchase the vacation home?
$73,712
$73,951
$294,847
$295,806