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Unformatted text preview: FIN 3403 Exam 2 Name: ____________________________________ March 2, 2006 Instructions: Write your answers on the answer sheet provided. No cell phones allowed. 1. Calculate the future value at the end of 5 years if you deposit $15,000 today into an account that earns 2% annual interest 2. You wish to purchase a home exactly 6 years from today. The home you wish to purchase costs $330,000 today. Estimate the price at the end of 6 years if inflation is 3% per year. 3. What single investment made today, earning 9% annual interest, will be worth $3,200 at the end of 3 years? 4. An Iowa State Savings Bond can be converted to $50 at maturity 9 years from purchase. If the state bonds are to be competitive with US Savings Bonds, which pay 5.5% annual interest (compounded annually), at what price must the state sell its bonds? Assume no cash payments on savings bonds prior to redemption. 5. In exchange for a $20,000 payment today, a well-known company will allow you to choose one of the alternatives. Your opportunity cost is 11%. A) $30,000 at the end of 3 years. B) $63,000 at the end of 9 years, C) $193,000 at the end of 20 years. What option, A, B or C do you choose? 6. What is the future value of an ordinary annuity that pays $8,000 per year for 5 years if the interest rate is 8%? 7. What is the future value of an annuity due that pays $8,000 per year for 5 years if the interest rate is 8%? 8. An insurance agent is trying to sell you an immediate-retirement annuity for which a single amount paid today will provide you with $5,600 at the end of each year for the next 35 years. amount paid today will provide you with $5,600 at the end of each year for the next 35 years....
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This note was uploaded on 02/09/2012 for the course MGT 3078 taught by Professor Marchman during the Spring '12 term at Georgia Institute of Technology.
- Spring '12