Fina A - 1. Question :

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1. Question : You want to buy a new sports car 3 years from now, and you plan to save $4,200 per year, beginning one  year from today. You will deposit your savings in an account that pays 5.2% interest. How much will you  have just after you make the 3rd deposit, 3 years from now? Student Answer: a.       $11,973.07 b.       $12,603.23 c.       $13,266.56 ( N        3 I/YR    5.2% PV      $0.00 PMT    $4,200 FV      $13,266.56 ) d.       $13,929.88 e.       $14,626.38 2. Question : Suppose you inherited $275,000 and invested it at 8.25% per year. How much could you withdraw at the  beginning of each of the next 20 years? Student Answer: a.       $22,598.63 b.       $23,788.03 c.       $25,040.03 d.       $26,357.92 ( N        20 I/YR    8.25% PV      $275,000 FV      $0.00 PMT    $26,357.92 )
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e.       $27,675.82 3. Question : What's the rate of return you would earn if you paid $950 for a perpetuity that pays $85 per year? Student Answer: a.       6.52% b.       7.25% c.       8.05% d.       8.95% ( Cost (PV)      $950 PMT    $85 I/YR    8.95% ) e.       9.84% 4. Question : What is the present value of the following cash flow stream if the interest rate is 6.0% per year? 0 at Time  0; $1,000 at the end of Year 1; and $2,000 at the end of Years 2, 3, and 4. Student Answer: a.       $5,986.81 ( I/YR = 6.0%           0        1  CFs:    $0      $ $2,000 PV of CFs:     $ $1,679 $1,584
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PV =   $5,986. the Excel NPV PV =   $5,986. summing indiv PV =   $5,986. the calculator N ) b.       $6,286.16 c.       $6,600.46 d.       $6,930.49 e.       $7,277.01 5. Question :
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This note was uploaded on 06/05/2010 for the course FINA 6260 taught by Professor Fort during the Spring '10 term at University of Arkansas for Medical Sciences.

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Fina A - 1. Question :

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