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5)
The proportion of interest versus principal repayment would be the
same for each of the 7 payments.
8. Which of the following statements is CORRECT?
1) A time line is not meaningful unless all cash flows occur annually.
2)
Time lines are not 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 end of the periods, i.e., for ordinary annuities.
5)
Time lines can be constructed where some of the payments
constitute an annuity but others are unequal and thus are not part of the
annuity.
9.
Which of the following investments would have the highest future
value at the end of 10 years? Assume that the effective annual rate for all
investments is the same and is greater than zero.
1) Investment A pays $250 at the beginning of every year for the next
10 years (a total of 10 payments).
2) Investment B pays $125 at the end of every 6-month period for the
next 10 years (a total of 20 payments).
3) Investment C pays $125 at the beginning of every 6-month period
for the next 10 years (a total of 20 payments).