Year 1 Year 2 Year 3
$1,200 $1,800 $2,900
What is the present value of these cash flows, given a 9 percent discount rate?
Today you earn a salary of $28,500. What will your annual salary be fifteen years from now if you earn annual raises average 3.5 percent annually?
Todd is able to pay $160 a month for five years (60 monthly payments) for a car. If the interest rate is a 4.9 percent annual rate, how much can Todd afford to borrow to buy a car?
You have $2,500 that you want to use to open a savings account. You have found five different accounts that are acceptable to you. All you have to do now is determine which account you want to use such that you can earn the highest rate of interest possible. Which account should you use based upon the annual percentage rates quoted by each bank?
account A: 3.75 percent, compounded annually
account B: 3.70 percent, compounded monthly
account C: 3.70 percent, compounded semi-annually
account D: 3.66 percent, compounded quarterly
A) account A
B) account B
C) account C
D) account D
E) account E
You are considering two loans as part of buying a car. The terms of the two loans are equivalent with the exception of the interest rates.
Loan A offers a rate of 7.45 percent compounded daily.
Loan B offers a rate of 7.5 percent compounded semi-annually.
Loan _____ is the better offer because______:
A) A; you will pay less interest.
B) A; the annual percentage rate is 7.45 percent.
C) B; the annual percentage rate is 7.64 percent.
D) B; the interest is compounded less frequently.
E) B; the effective annual rate is 7.64 percent.
What is the future value of $2,896 invested for twelve years at 6.5 percent compounded annually?
You own a classic automobile that is currently valued at $39,500. If the value increases by 6 percent annually, how much will the auto be worth ten years from now?
You just won the lottery! As your prize you will receive $1,200 a month for 100 months. If you can earn 8 percent annually on your money, what is this prize worth to you today (it's present value)?
What is the effective annual rate if a bank charges you an APR of 7.64 percent compounded quarterly?
A) 7.79 percent
B) 7.86 percent
C) 7.95 percent
D) 7.98 percent
E) 8.01 percent
What is the present value of $13,450 to be received four years from today, if the discount rate is a 5.25 percent annual rate?
Janet plans on saving $3,000 a year and expects to earn 8.5 percent annually. She plans to invest the money at the end of each year. How much will Janet have at the end of twenty-five years if she earns what she expects?
Your grandmother invested one lump sum 17 years ago and earned 4.25%, compounded annually per year. Today, she gave you the proceeds of that investment which totaled $5,539.92. How much did your grandmother originally invest?
You would like to give your daughter $40,000 towards her college education thirteen years from today. How much money must you set aside today for this purpose if you can earn an annual 6.3 percent on your funds, compounded quarterly?
You borrow $5,600 to buy a car. The terms of the loan call for monthly payments for four years at a 5.9 percent annual rate of interest. What is the amount of each monthly payment?
You have been investing $120 a month for the last 15 years(180 months). Today, your investment account is worth $47,341.19. What is your average annual rate of return on your investments? (Hint: You are calculating a monthly rate that needs to be converted to a yearly rate)
A) 9.34 percent
B) 9.37 percent
C) 9.40 percent
D) 9.42 percent
E) 9.46 percent
You have just graduated from school and have accumulated $24,500 of debt. If the annual interest rate is 6.5 percent and you want to pay it off within five years, how much must you pay each month?
Bob bought some land costing $14,990 years ago. Today that same land is valued at $55,000. How long has Bob owned this land if the price of land has been increasing at 6 percent per year?
A) 21.82 years
B) 21.98 years
C) 22.03 years
D) 22.31 years
E) 22.44 years
You are considering an annuity which costs $100,000 today. The annuity pays $6,000 a year at the end of each year. The rate of return is 4.5 percent. How many years of annuity payments will you receive?
A) 24.96 years
B) 29.48 years
C) 31.49 years
D) 33.08 years
E) 38.00 years
You are considering two insurance settlement offers. The first offer includes annual payments of $5,000, $7,500, and $10,000 over the next three years, respectively. The other offer is the payment of one lump sum amount today. You are trying to decide which offer to accept given the fact that your discount rate is 5 percent. What is the minimum amount that you will accept today if you are to select the lump sum offer?
Today, you signed loan papers agreeing to borrow $4,954.85 at 9 percent compounded monthly. The loan payment is $143.84 a month. How many loan payments must you make before the loan is paid in full?
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