FIN 534 RANK Change The World /fin534rank.com FIN 534 RANK Change The World /fin534rank.com | Page 68

1)
A time line is not meaningful unless all cash flows occur annually
2)
Time lines are useful for visualizing complex problems prior to
doing actual calculations
3)
Time lines cannot be constructed to deal with situations where
some of the cash flows occur annually but others occur quarterly
4)
Time lines can only be constructed for annuities where the
payments occur at the ends of the periods, i.e., for ordinary annuities
5)
Time lines cannot be constructed where some of the payments
constitute an annuity but others are unequal and thus are not part of the
annuity
2.
Which of the following statements regarding a 30-year monthly
payment amortized mortgage with a nominal interest rate of 10% is
CORRECT?
1)
The monthly payments will decline over time.
2) A smaller proportion of the last monthly payment will be interest,
and a larger proportion will be principal, than for the first monthly
payment
3)
The total dollar amount of principal being paid off each month gets
smaller as the loan approaches maturity
4)
The amount representing interest in the first payment would be
higher if the nominal interest rate were 7% rather than 10%.
5)
Exactly 10% of the first monthly payment represents interest