ADMS3530-Tutorial 1 Questions

ADMS3530-Tutorial 1 Questions - 3530 W2011 Tutorial 1...

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3530 W2011 - Tutorial 1 Questions 1. The Joshua Co. plans on saving money to buy some new equipment. The company is opening an account today with a deposit of $15,000 and expects to earn 4% interest annually. After 3 years, the firm wants to add an additional $50,000 to the account. If the account continues and earns 4% interest compounded semi-annually after 3 years, how much money will the Joshua Co. have in their account five years from now? A) $66,872.96 B) $68,249.79 C) $70,952.96 D) $72,385.44 2. A credit card company sends you a promotion that says it will charge you an interest rate of 1.25% monthly. In this case the annual percentage rate (APR) is ____ and the effective annual rate (EAR) is _______ and if I carried a $300 balance throughout the year I would owe _______ at the end of the year. A) 16.08%; 15.00%; $348.24 B) 15.00%; 14.55%; $345.00 C) 14.55%; 15.00%; $345.00 D) 15.00%; 16.08%; $348.24 3. Prizes are often not “worth” as much as claimed. Place a value on a prize of $5,000,000 that is to be received in equal annual payments over the next 20 years, with the first payment beginning today. Assume an interest rate of 7% over the 20-year period. A) $2,212,652 B) $2,648,504 C) $2,833,899 D) $2,950,567 4. Which of the following strategies will allow real retirement spending to remain approximately equal, assuming savings of $1,000,000 invested at 8% annually, a 25- year time horizon, and a 4 percent expected annual inflation rate? A) Spend approximately $63,000 annually. B) Spend approximately $78,225 annually.
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ADMS3530-Tutorial 1 Questions - 3530 W2011 Tutorial 1...

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