Quiz_4_Fall__08

Quiz_4_Fall__08 - Group 1 1 Assuming you are in the 30 tax...

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Group 1 1. Assuming you are in the 30% tax bracket, what is your after-tax rate on a 2.5% CD? A. 1.25% B. 0.70% C. 1.50% D. 1.75% E. 2.00% Answer: D 2. Assuming you are in the 25% tax bracket, what is your after-tax rate on a 2.5% CD? A. 1.25% B. 1.875% C. 1.75% D. 1.50% E. 0.70% Answer: B Group 2 3. What interest rate would you have to earn if you wanted to double an investment in 8 years? A. 8% B. 7% C. 9% D. 9.5% E. 11% Answer: C 4. What interest rate would you have to earn if you wanted to double an investment in 5 years? A. 8% B. 7% C. 9% D. 9.5% E. 14.4% Answer: E
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[Group 3] 5. An investor will receive a 5-year annuity of $2,500 per year. If the annual interest rate is 8%, what is the present value of this annuity? A. $10,531 B. $9,982 C. $12,500 D. $8,500 E. $7,500 Answer: B 6. An investor will receive a 7-year annuity of $1,000 per year. If the annual interest rate is 12%, what is the present value of this annuity? A. $6,194 B. $5,389 C. $7,000 D. $4,564 E. $2,660 Answer: D [Group 4] 7. Zoe makes a payment of $25,000 a year on her airplane. At the end of 15 years, she's paid off the entire $200,000 loan. What was her approximate annual interest rate? A. 6.92% B. 8.76% C. 9.13% D. 7.35% E. 9.62% Answer: C [Group 5] 8. Your uncle needs $650,000 upon retirement in 10 years to live comfortably. He can invest $50,000 a year to his retirement. What interest rate would his investment need to appreciate at in order for him to meet his goals? A. 9.5% B. 5.0% C. 6.1% D. 5.7% E. 8.0% Answer: D
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9. Your uncle needs $5,000,000 upon retirement in 25 years to live comfortably. He can invest $75,000 a year to his retirement. What interest rate would his investment need to appreciate at in order for him to meet his goals? A. 7.4% B. 22.1% C. 12.8% D. 20.0% E. 5.7% Answer: A [Group 6] 10. If you invest $1000 today, assuming it grows at 7% per year (tax-free), how much will this be worth in five years? A. $1,569 B. $1,400 C. $1,500 D. $1,251 E. $1,403 Answer: E 11. If you invest $1,000 today at a rate of 8% (tax-free), how much will it be worth 10 years from now? A. $2,143.59 B. $8,000.00 C. $2,158.93 D. $14,486.56 E. $215.89 Answer: C 12. If you invest $1,000 today at a rate of 10% (tax-free), how much will it be worth 8 years from now? A. $2,143.59 B. $2,593.74 C. $8,000.00 D. $1,143.59 E. $2,158.92 Answer: A [Group 7] 13. Which of the following is true concerning the difference between simple and compound interest?
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A. With compound interest, interest is earned only on the original investment whereas with simple
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Quiz_4_Fall__08 - Group 1 1 Assuming you are in the 30 tax...

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