FIN 300 Time-Value-of-Money Practice Quiz (Relates to Chapters 5 & 6) 1.Mary bought her house in 1966 and she sold it 40 years later for a price 7 times what she originally paid. What was her annual rate of return? Assume annual compounding. 2.Timmy was given $100 by his grandmother. He wants to invest the gift to buy a $300 bicycle. If he can earn 3.6% quoted APR (w/monthly compounding) in a savings account, how long in years will it take until he can buy the bike. 3.Someone offers to sell an investment that promises to pay $100,000 in exactly 20 years, your required rate of return is 5% (assume annual compounding). What is a fair value (today) for the investment? 4.You are borrowing $40,000 to buy a Lexus. The loan has a 2.4% quoted APR with monthly compounding (and end-of-the-month monthly payments) and lasts for 6 years. How much (the dollar amount, that is) of the first payment consists of interest? How much (the dollar amount) of the first payment consists of principal? 5.You go to the bank to borrow $300,000 to buy a house. The bank offers you a 4.8%

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