Quiz_4_Fall__08

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

This preview shows pages 1–5. Sign up to view the full content.

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

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
[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
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?

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
A. With compound interest, interest is earned only on the original investment whereas with simple
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 06/03/2010 for the course BA 302 taught by Professor R during the Fall '08 term at Penn State.

### Page1 / 10

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

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online