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Midterm #1 – Fall 2018 – Econ 134AOctober 22, 2018Test Form AName (Please Print) : ______________________________________Seat:_____________By signing below, I acknowledge that I have checked photo identification to the people to my immediate left and right, and that the name matches what is listed on the test and scantron. (Students do not need to go across an aisle to check identification.) If a student does not have a photo identification, I will report it to the instructor before the test starts.I am also aware that I need to bubble in the form letter and my name and perm number on my scantron, and include my name, perm number, and section time on the open response sheet. I am aware that not having a photo identification may result in receiving a score of zero on the test if I do not talk to the instructor immediately before or after the test.Finally, by signing below, I acknowledge that this test will count as part of my course grade. If I fail to turn in the test, a score of zero will be entered.Name (Please Print):____________________________________________Signature_____________________________________________________Econ 134AJohn HartmanTest 1, Form AOctober 22, 2018Instructions:YOU WILL TURN IN YOUR SCANTRON AND THE PROBLEMS PAGE. MAKE SURE ALL WORK AND ANSWERS ARE PROVIDED ON THESE. BUBBLE IN YOUR TEST FORM, NAME, AND PERM NUMBER ON YOUR SCANTRON.You have 40 minutes to complete this test, unless you arrive late. Late arrival will lower the time available to you, and you must finish at the same time as all other students.Cheating will not be tolerated during any test. Any suspected cheating will be reported to the relevant authorities on this issue.You are allowed to use a nonprogrammable four-function or scientific calculator that is NOT a communication device. You are NOT allowed to have a calculator that stores formulas, buttons that automatically calculate IRR, NPV, or any other concept covered in this class. You are NOT allowed to have a calculator that has the ability to produce graphs. If you use a calculator that does not meet these requirements, you will be assumed to be cheating.Unless otherwise specified, you can assume the following:Negative internal rates of return are not possible.Equivalent annual cost problems are in real dollars.You are allowed to turn in your test early if there are at least 10 minutes remaining. As a courtesy to your classmates, you will not be allowed to leave during the final 10 minutes of the test.Your test should have 5 multiple choice questions (10 points) and 2 problems (14 points). The maximum possible point total is 24 points. If your test is incomplete, it is your responsibility to notify a proctor to get a new test.For your reference, an example of a well-labeled graph is below:MULTIPLE CHOICE: Answer the following questions on your scantron. Each correct answer is worth 2 points. All incorrect or blank answers are worth 0 points. If there is an answer that does not exactly match the correct answer, choose the closest answer.1. Marsha is acquiring a negative amortization loan today, with monthly payments. She is borrowing $100,000. Which of the following amounts could be the first minimum required monthly payment if the stated annual interest rate is 18%, compounded monthly? (If more than one of the first four answers are possible, pick E.)A. $1,400B. $1,500C. $1,600D. $1,700E. More than one answer is possible2. Alexander is figuring how to invest some money he inherited from the sale of his grandmother’s baseball card collection. If Investments Y and Z are mutually exclusive, which of the following statements is true? Assume that Y and Z are not the only investments available for Alexander to invest in. (Note that X is another investment option available to Alexander.)A. If Alexander invests in Y, he must invest all of the money in Y aloneB. If Alexander invests in X, he must invest some of his money in Y alsoC. Both Y and Z must have the same amount of money invested in themD. If Alexander invests in Y, he cannot invest any money in ZE. None of the above3. A bank deposit will earn an 8% stated annual interest, compounded continuously. How many years are necessary for the amount in the account to double? Assume no other deposits or withdrawals.A. 8.55B. 8.65C. 8.75D. 8.85E. 9.004. A stated annual interest rate of 5%, compounded four times per year, is equivalent to a stated annual interest rate of _____%, compounded three times per year.A. 4.8%B. 4.9%C. 5.0%D. 5.1%E. 5.2%5. Audrey is about to receive $50,000 for a loan, to be completely paid back with 40 monthly payments (starting one month from today). The stated annual interest rate for the loan is 9%, compounded monthly. The amount of principal reduction each month is constant. How much will the first payment be?A. $1,625B. $1,575C. $1,500D. $1,450E. $1,400Name___________________ Perm #_____________ Day/time of section_______________________For the following problems, you will need to write out the solution. You must show all work to receive credit. Each problem (or part of problem) shows the maximum point value. Provide at least four significant digits to each answer or you may not receive full credit for a correct solution. Show all work in order to receive credit. You will receive partial credit for incorrect solutions in some instances. Clearly circle your answer(s) or else you may not receive full credit for a complete and correct solution.6. (6 points) Macy owns her own construction business, and she is considering buying a new heavy-duty pump. She has a choice of buying the machine for $1,000, and the machine will last for 5 years. She can also rent the machine, paying $X each year for 5 years, starting today. (Note she makes 5 payments if she rents the machine.) If Macy’s effective annual discount rate is 10%, and both options (buying and renting) have the same present value cost, what is X?7. (8 points) Parker will be receiving $50,000 from the Bellinder Orange National Bank today. The loan will last for 16 years, but the loan has a 30-year amortization schedule. (In other words, all payments will be made over the next 16 years, but the payment schedule will be made to mimic a 30-year payback for the loan.) The effective annual interest rate is 12%. The regular payments will be made yearly, starting one year from today. How much will the balloon payment have to be 16 years from today in order to completely pay back the loan?NOTE: YOU CAN TEAR THIS SHEET OFF AND USE AS EXTRA SCRATCH PAPER. PLEASE NOTE THAT ANYTHING ON THIS SHEET WILL NOT BE GRADED UNLESS EXPLICITLY SPECIFIED ON THE TEST.PerpetuityAnnuityGrowing perpetuityGrowing annuityQuadratic formulaax2 + bx + c = 0 Logarithmic ruleab = c b = log c / log a ................
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