Chapter 3 Review Problems.pdf

# Chapter 3 Review Problems.pdf - FIN!20150...

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FIN 20150 Chapter 3 Review Problems Time Value of Money The cost of rebuilding the old county bridge in 2017 is \$2,300,000.00. Engineers estimate the cost will rise by 8% if the project is delayed one year until 2018. If the risk free rate is 4%, what is the cost of delaying the project in terms of 2017 dollars? a. \$ 276,000.00 b. \$ 184,000.00 c. \$ 92,000.00 d. \$ 88,461.54 e. \$ 0.00 f. None of the above answers is within \$5,000 of the actual cost of delaying the project one year.

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FIN 20150 Chapter 3 Review Problems Your great aunt Matilda put some money in an account for you on the day you were born. This account pays 3% interest compounded annually. On your 21st birthday the account balance was \$33,555.50. 1. The amount of money that your great aunt Matilda originally put into the account is closest to: a. \$ 33,555.50 b. \$ 19,136.23 c. \$ 18,578.87 d. \$ 18,037.73 e. \$ 17,512.36 f. \$ 17,002.29 2. The amount of money that would be in the account if you left the money there until your 65th birthday is closest to: a. \$ 106,271.17 b. \$ 112,743.09 c. \$ 116,125.38 d. \$ 119,609.14 e. \$ 126,893.34 f. None of the above is within \$1,000 of the amount of money that would be in the account if you left it there until your 65 th birthday.
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