The Windsor Honda offers payments of $493.19 per month for 48 months on a 2013 Civic at the complete price of $21,000 with zero down. What is the annual percentage rate (APR) of this loan?

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August 18, 2019
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August 18, 2019

The Windsor Honda offers payments of $493.19 per month for 48 months on a 2013 Civic at the complete price of $21,000 with zero down. What is the annual percentage rate (APR) of this loan?

The Windsor Honda offers payments of $493.19 per month for 48 months on a 2013 Civic at the complete price of $21,000 with zero down. What is the annual percentage rate (APR) of this loan?
____
A) 12%
B) 11%
C) 9%
D) 6%

10. A 3-year, 6% coupon, semi-annual-pay note has a yield-to-maturity (YTM) of 5.5%. If an investor holds this note to maturity and earns a 4.5% return on reinvested coupon income, his realized yield on this note is closer to
____
A) 6.00%
B) 5.68%
C) 5.57%
D) 5.46%

(Consider the following information for Questions 14 and 15)

An MNC wishes to sell €2 million that it has received from a French customer to obtain the US dollar. The following alternatives are available.

Bank Currency Pair Bid Ask Commission
A EURUSD 1.4512 1.4519 USD 250
B EURUSD 1.4511 1.4520 USD 100
C USDEUR 0.6890 0.6891 USD 150

14. Among the above, which bank provides the highest amount of USD?
____
A) Bank A
B) Bank B
C) Bank C
D) They are equally attractive

15. Assume that Bank B transacts with two customers. The first customer purchases €5 million and the second customer sells €5 million. How much profit is made by Bank B?
____
A) $3,000
B) $3,500
C) $4,100
D) $4,700

26) The market price is $282,500 for a 6% non-callable corporate bond with a par value of $275,000 and 14 years to mature. It pays coupon interest semi-annually. The required rate of return on similar bonds is presently 4%. How much accrued interest would have to be paid if you purchase the bond on Oct 12, 2013 if the bond matures on May 31, 2027?
____
A) $6,058
B) $5,345
C) $4,830
D) $3,028

28. You purchase a Treasury real return bond with an original principal amount of $1,000,000 and a 2.8% annual coupon (paid semi-annually). What will be the first coupon payment be if the semi-annual inflation over the first six months is 1.2%?
____
A) $12,336
B) $14,000
C) $28,336
D) $14,168

Assume that a $500 million pool of mortgages backs a new MBS issue. The projected prepayment speed is 160% PSA.

31. What is the single monthly mortality (SMM) rate for the first month?
____
A) 0.01668%
B) 0.02243%
C) 0.02336%
D) 0.02670%

32. If the estimated prepayment for the first month will be $133,460, what is the scheduled principal repayment for this period?
____
A) $200,000
B) $150,000
C) $100,000
D) Undetermined

43. $30,000 is borrowed for a car loan. If this loan is to be repaid over two and half years with monthly payments at 12% per annum, how much total interest will be paid?
____
A) $3,600
B) $4.050
C) $4,873
D) $5,196

Part 2

7. A 3-year default-free government bond with a par value of $1,000 and a coupon rate of 6% (annual payment) will trade
____
A) At a discount
B) At a premium
C) At par
D) Undetermined due to insufficient information

8. What is the annual forward rate between year 3 and year 5 (i.e. the forward rate quoted today for an investment beginning in three/four years and maturing in four/five years)?
____
A) 4.55%
B) 4.15%
C) 4.75%
D) 4.35%

(Use the following information for Questions 9 and 10)

Consider this project:
Year 0 1 2 3
Net Cash Flows -$100 $76 $42 -$18
9. How many IRRs are possible for this 3-year project?
_____
A) 3
B) 2
C) 1
D) 0

10. With a cost of capital at 3%, find the modified profitability index (MPI) of this project.
____
A) 0.969
B) 1.132
C) 0.973
D) 1.031

11. You are opening up a new mall. You presently have more potential clients who want to move in the mall than you have space available. If you are trying to determining the optimal allocation of your retail space, which business should be the last one leased?
Business Name Squared Feet Required Expected Monthly Cash Flows
Pizza Nova 2,500 $52,500
Super Fitness Gym 4,000 $70,000
Rexall Drugs 6,000 $147,000
Wind Mobile 1,000 $22,250

_____
A) Wind Mobile
B) Pizza Nova
C) Super Fitness Gym
D) Rexall Drugs

13. Consider the following investment alternatives:
Investment W X Y Z
Rate 6.250% 6.100% 6.125% 6.120%
Compounding Annual Daily Quarterly Monthly
Which alternative offers you the highest effective rate of return?
____
A) Investment W
B) Investment X
C) Investment Y
D) Investment Z

ABC Co. is facing capital rationing for the next two years. The cost of capital is 5% that will continue into the near future. However, all unused funds only earn an investment opportunity rate of 3% per year until rationing ends. Cash flows for two mutually exclusive projects are given below:

Year 0 1 2 3
Project X -$1,000 $550 $550 $550
Project Y -$395 $500 $500

19. What is the terminal wealth of Project X?
____
A) $598.58
B) $579.41
C) $558.98
D) $548.81

20. Instead of two years, rationing becomes indefinite. Which of the following is true?
____
A) Accept either project since both have the same IRR
B) Choose Y over X due to its higher NPV
C) Choose X over Y due to its longer life span
D) None of the above

(Use the following information for Questions 25 to 28)

You own a small manufacturing plant that currently generates revenues of $2 million per year. Next year, based upon a decision on a long-term government contract, your revenues will either increase by 20% or decrease by 25%, with equal probability, and stay at that level as long as you operate the plant. Other costs run $1.6 million per year. You can sell the plant at any time to a large conglomerate for $5 million and your cost of capital is 10%.

25. If you are awarded the government contract and your sales increase by 20%, then the value of your plant will be:.
____
A) $5 million
B) $8 million
C) $0 million
D) $4 million
Hint:

26. If you are not awarded the government contract and your sales decrease by 25%, then the value of your plant will be:
____
A) -$1 million
B) $5 million
C) $8 million
D) $0 million

27. Given the embedded option to sell the plant, the plant’s expected value will be:
____
A) $5.0 million
B) $4.0 million
C) $6.5 million
D) $8.0 million
Hint:

28. Assume that you are unable to sell the plant, but you can shut down the plant at no cost at anytime. Given this embedded option to abandon production, the expected value of your plant will be:
____
A) $8.0 million
B) $4.0 million
C) $5.0 million
D) $6.5 million

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The Windsor Honda offers payments of $493.19 per month for 48 months on a 2013 Civic at the complete price of $21,000 with zero down. What is the annual percentage rate (APR) of this loan? was first posted on August 18, 2019 at 1:08 am.
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