Quiz_4_Spring_2010

Quiz_4_Spring_2010 - G roup 1 1. A. B. C. D. E. Assuming...

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Group 1 1. Assuming you are in the 20% tax bracket, what is your after-tax rate on a 3.5% CD? A. 1.25% B. 0.70% C. 1.50% D. 2.80% E. 2.00% Answer: D 2. Assuming you are in the 30% tax bracket, what is your after-tax rate on a 3% CD? A. 1.25% B. 2.1% 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 10 years? A. 8% B. 7% C. 7.2% D. 9.5% E. 11% Answer: C
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4. What interest rate would you have to earn if you wanted to double an investment in 6 years? A. 8% B. 7% C. 9% D. 9.5% E. 12% Answer: E Group 3 5. An investor will receive a 6-year annuity of $3,000 per year. If the annual interest rate is 6%, what is the present value of this annuity? A. $10,531 B. $14,752 C. $12,500 D. $8,500 E. $7,500 Answer: B 6. An investor will receive a 5-year annuity of $1,250 per year. If the annual interest rate is 10%, what is the present value of this annuity? A. $6,194 B. $5,389 C. $7,000 D. $4,738 E. $2,660 Answer: D
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Group 4 7. Liz makes a payment of $25,000 a year on her boat. 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 8. Frankie makes a payment of $10,000 a year on her boat. At the end of 12 years, she’s paid off the entire $75,000 loan. What was her approximate interest rate? A. 7.26% B. 7.81% C. 8.09% D. 8.54% E. 9/15% Answer: C Group 5 9. Your uncle needs $800,000 upon retirement in 9 years to live comfortably. He can invest $60,000 a year to his retirement. What interest rate would his investment need to appreciate at in order for him to meet his goals? A. 10.26% B. 5.09% C. 6.12%
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D. 9.56% E. 8.0% Answer: D 10. Your uncle needs $4,000,000 upon retirement in 20 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. 9.37% B. 12.1% C. 2.8% D. 20.0% E. 5.7% Answer: A Group 6 11. If you invest $2000 today, assuming it grows at 8% per year (tax-free), how much will this be worth in 6 years? A. $4,569 B. $5,473 C. $1,515 D. $1,251 E. $3,174 Answer: E 12. If you invest $1,200 today at a rate of 7% (tax-free), how much will it be worth 8 years from now? A. $2,943 B. $6,397 C. $2,062
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D. $4,486 E. $1,215 Answer: C 13. If you invest $1,400 today at a rate of 8% (tax-free), how much will it be worth 9 years from now? A. $2,798 B. $2,593 C. $4,000 D. $1,143 E. $5,158 Answer: A Group 7 14. Which of the following is true concerning the difference between simple and compound interest? A. With compound interest, interest is earned only on the original investment whereas with simple interest, interest is earned on interest. B.
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Quiz_4_Spring_2010 - G roup 1 1. A. B. C. D. E. Assuming...

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