Ch5-6 Problems

# Ch5-6 Problems - Practice Questions Chapters 5 and 6 1 How...

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Practice Questions - Chapters 5 and 6 1. How much money do you need to place into a bank account which pays a 6% annual rate in order to have \$500 at the end of 7 years? a) \$332.53 d) \$629.52 b) \$751.82 e) \$333.17 c) \$463.77 2. How much money would you need to place in an account to have \$1,000 10 years from today? Assume the account pays 8.5% and it is compounded monthly. Round to the nearest \$1. 3. Columbia Corporation deposited \$2,000 in an account that pays 12% interest annually. If the interest is compounded continuously, how much money will be in the account at the end of 20 years? 4. Which of the following provides the greatest annual return? 5. If you borrow \$25,000 from a local finance company and you are required to pay \$4,424.50 per year for 10 years, what is the annual interest rate on the loan? a) 12% d) 13.6% b) 18.9% e) 14.4% c) 15.9% 6. How much do you have to deposit today so that you can withdraw \$50,000 a year at the end of years 5 through 9, and \$25,000 at the end of year 10? Assume that you can earn an annual rate of 8 percent.

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7. If you want to have \$875 in 36 months, how much money must you put in a savings account today? Assume that the savings account pays 16% and it is compounded quarterly. Round to the nearest \$1. 8. You just purchased a parcel of land for \$10,000. If you expect a 12 percent annual rate of return on your investment, how much will you sell the land for in 10 years? 9. Amax Inc. deposited \$2,000 in a bank account that pays 12% interest annually. How much money will be in the account after 4 years? a) \$2,525 d) \$3,100 b) \$2,800 e) \$3,147 c) \$3,111 10. Your grandmother deposited \$100 in a savings account for you 25 years ago. The money has been earning an annual rate of 12% interest, compounded quarterly. How much money is now in the account?
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