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# Quiz 7 - FIN 360 Quiz#7 Name_Jeremy Pflug 1 Kimberly Ford...

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FIN 360 Quiz #7 Name: _Jeremy Pflug ______________ 1. Kimberly Ford invested \$10,000 10 years ago at 16 percent, compounded quarterly. How much has she accumulated? \$10,000 × FVIF(4%, 40) = 10,000 × 41.6 = \$416,000 2. A professional baseball rookie has just signed a five-year contract that requires a salary of \$200,000 in each of the first three years and \$400,000 in the latter two years. Assuming an opportunity rate of 12%, what is the present value of the contract? 3*(\$200,000 * 1.12) + 2*(\$400,000 * 1.12) = \$672,000 + 896,000 = \$1,568,000 3. Mr. Bearer may choose to take a lump-sum payment of \$25,292.8 now from his insurance policy or an annuity of \$3,200 annually as long as he lives. How long must Mr. Bearer anticipate living for the annuity to be indifferent to the lump sum if interest rate is 8%? Mr. Bearer needs to anticipate living for 8 more years in order to achieve a sum of over 25,292.80. At 8 years, we will have received \$27,648. 4. Mrs. Vandelay just won the U.S. Publishers’ Sweepstakes. He must decide whether to take a lump sum payment of \$5,000,000 now or \$500,000 at the end of each year for 25 years. If Mr.

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