Chapter 6
Chapter 6
1.
You decide to begin saving towards the purchase of a new car in 5 years.
If you
put $1,000 at the end of each of the next 5 years in a savings account paying 6%
compounded annually, how much will you accumulate after 5 years?
a.
$6,691.13
b. $5,637.09
c. 1,338.23
d. $5,975.32
e. $5,731.94
2.
Using the information in the previous problem, what would be the ending amount
if the payments were made at the beginning of the year?
a.
$6,691.13
b. $5,637.09
c. 1,338.23
d. $5,975.32
e. $5,731.94
3.
Using the information in the previous problem, what would be the ending amount
if $500 payments were made at the end of each 6 month period for 5 years and the
account p aid 6% compounded semiannually?
a.
$6,691.13
b. $5,637.09
c. 1,338.23
d. $5,975.32
e. $5,731.94
4.
You have applied for a mortgage of $60,000 to finance the purchase of a new
home.
The bank will require you to make annual payments of $7,047.55 at the
end of each of the next 20 years.
Determine the interest rate in effect on this
mortgage.
a. 8%
b. 9.8%
c. 10%
d. 51%
e. 11.2%
5.
If you would like to accumulate $7,500 over the next 5 years, how much must you
deposit each six months, starting six months from now, given a 6% interest rate
and semiannual compounding?
a. $1,330.47
b. $879.23
c. $654.23
d. $569.00
e. $732.67
6.
A company is offering bonds that pay $100 per year indefinitely.
If you require a
12% return on these bonds what is the value of each bond?
a. $1,000
b. $962
c. $904.67
d. $866.67
e. $833.33
7.
Today is your birthday, and you decide to start saving for your college education.
You will begin college on your 18