单选题

Use a stated rate of 9 percent compounded periodically to answer the following three questions. Select the choice that is the closest to the correct answer.

单选题 The semi - annual effective rate is :

A、

A.9.20%.
B、

B.9.00%.
C、

C. 10.25%.

【正确答案】 A

【答案解析】
First, we need to calculate the periodic rate, or 0.09/2=0.045.
Then, the effective semi - annual rate=(1+0.045)²-1=0.09203, or 9.20%.

单选题 An investment offers $100 per year forever. If Peter Wallace's required rate of return on this investment is 10 percent, how much is this investment worth to him?

A、

A. $500.
B、

B. $100 million.
C、

C. $1000.

【正确答案】 C

【答案解析】For a perpetuity, PV=PMT/I=100/0.10=1000.

单选题 The quarterly effective rate is:

A、

A.9.31%.
B、

B.9.00%.
C、

C.9.20%.

【正确答案】 A

【答案解析】
First, we need to calculate the periodic rate, or 0.09/4=0.0225.
Then, the effective annual rate = (1+0.0225)⁴-1=0.09308, or 9.31%.