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

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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. a) $893 d) $429 b) $932 e) $833 c) $442 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? a) $19,293 d) $22,704 b) $22,046 e) $22,900 c) $22,553 4. Which of the following provides the greatest annual return? a) 16% compounded quarterly d) 16% compounded annually b) 15% compounded continuously e) all of the above are equal c) 15.2% compounded daily 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. a) $170,983 d) $158,318 b) $146,591 e) $159,243 c) $146,737
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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. a) $213 d) $547 b) $147 e) $746 c) $543 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? a) $25,000 d) $34,310 b) $31,058 e) $38,720 c) $31,384 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? a) $209 d) $5,051 b) $4,165 e) $1,922 c) $1,700 11. Suppose you invest $500 in a stock mutual fund at the end of each month. When you retire at the end of your 35-year career, your account is worth $4,000,000. What annual rate of return did you earn over the 35 years? a)
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Ch5-6 Problems - Practice Questions - Chapters 5 and 6 1....

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