FIN3302test12009[1]

FIN3302test12009[1] - 1. How much would you be willing to...

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How much would you be willing to pay (rounded to the nearest dollar) for a 20-year annuity due if the payments are $4,500 per year and you want to earn a rate of return equal to 5.5% per year? a. $84,500 b. $63,445 c. $56,734 d. $53,777 2. How much would you be willing to pay (rounded to the nearest dollar) for a 20-year ordinary annuity if the payments are $4,500 per year and you want to earn a rate of return equal to 5.5% per year? a. $84,500 b. $63,445 c. $56,734 d. $53,777 3. You just graduated and landed your first job in your new career. You remember that your favorite finance professor told you to begin the painless job of saving for retirement as soon as possible, so you decided to put away $2,000 at the end of each year in a Roth IRA. Your expected annual rate of return on the IRA is 7.5%. How much will you accumulate at retirement after 40 years of investing (note: this may assume that you are even retiring early )? a. $94,426 b. $247,921 c. $1,088,632 d. $454,513 4. Congratulations! You are the proud winner of the multi-state Sour Ball Lottery. You are to receive $2,000,000 at the end of each year for the next 20 years. While the Lottery Commission refers to this as a $40,000,000 jackpot, if you choose the “cash option” they will give you much less than that; you can receive a lump sum payment today equal to the present value of the ordinary annuity instead of the 20 annual payments. If the discount rate that the Lottery Commission uses to determine the lump sum payoff is 7%, what is your payoff if you select the cash option? a. $26,945,332 b. $39,707,503 c. $42,977,401 d. $21,188,028 5. Jimmy just bought a new Ford SUV for his business. The price of the vehicle was $40,000. Jimmy made a $5,000 down payment and took out an amortized loan for the rest. The car dealership made the loan at 8% interest compounded monthly for five years. He is to pay back the principal and interest in equal monthly installments beginning one month from now. Determine the amount of Jimmy's monthly payment. a.
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FIN3302test12009[1] - 1. How much would you be willing to...

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