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Quiz_4_Spring_2010

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

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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? Group 2 3. What interest rate would you have to earn if you wanted to double an investment in 10 years?

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4. What interest rate would you have to earn if you wanted to double an investment in 6 years? 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?
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? 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? 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? 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? 12. If you invest \$1,200 today at a rate of 7% (tax-free), how much will it be worth 8 years from now?
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?

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

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