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practice quiz 2 - BUSI 2405 Fall 2010 Practice Quiz 2 1...

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Page 1 BUSI 2405 Fall 2010 Practice Quiz 2 1. Your credit card company quotes you a rate of 16.9 percent. Interest is billed monthly. What is the actual rate of interest you are paying? A) 16.90 percent B) 17.33 percent C) 17.67 percent D) 18.03 percent E) 18.27 percent 2. You are paying an effective annual rate of 19.44 percent on your credit card. The interest is compounded monthly. What is the annual percentage rate on your account? 3. Westover Industries is considering purchasing the Eastward Co. Westover believes that Eastward can generate cash flows of $21,000, $17,000, and $10,000 over the next three years, respectively. After that time, Westover feels the Eastward Co. will be worthless. Westover has determined that a 16 percent rate of return is applicable to this potential purchase. What is the maximum amount Westover should pay to acquire the Eastward Co.? 4. Today, you are retiring. You have a total of $518,304 in your retirement savings and have the funds invested such that you expect to earn an average of 6 percent, compounded monthly, on this money throughout your retirement years. You want to withdraw $3,500 at the beginning of every month, starting today. How long will it be until you run out of money?
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