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optionals - chap 6

# optionals - chap 6 - Chapter 06 1 You can afford car...

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Chapter 06 ________ 1. You can afford car payments of \$265 a month for three years. The interest rate is 7.5 percent, compounded monthly. How much can you afford to borrow to buy a car? a. \$8,269.67 b. \$8,271.83 c. \$8,519.20 d. \$8,572.44 ________ 2. You want to retire on the day you have \$500,000 in your savings account. You expect to earn 5 percent, compounded monthly, on your money during your retirement. Your plan is to withdraw \$4,000 a month as retirement income from this account. How many months can you be retired until you run out of money? a. 100.83 b. 125.00 c. 176.94 d. 180.95 ________ 3. A preferred stock pays annual dividends of \$3.50. How much are you willing to pay today to buy one share of this stock if you want to earn a 13 percent rate of return? a. \$24.29 b. \$26.92 c. \$29.99 d. \$37.14 ________ 4. A project will produce cash flows of \$3,000, \$4,500, and \$5,000 a year for the next three years, respectively. What is the value of these cash flows today at a discount rate of 7.8 percent? a. \$10,646.57 b. \$10,986.09 c. \$11,122.44 d. \$11,477.01 ________ 5. Today you are opening a savings account and depositing an initial \$2,000 into it. You plan to deposit \$3,000 into the account one year from today and deposit another \$4,300 two years from today. How much will you have in your account five years from today if you earn a 7 percent rate of return? a. \$9,799.80 b. \$10,485.79 c. \$11,477.01

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optionals - chap 6 - Chapter 06 1 You can afford car...

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