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Question;32. You buy an annuity that will pay you $24,000 a;year for 25 years. The payments are paid on the first day of each year. What is;the value of this annuity today if the discount rate is 8.5 percent?;A. $241,309;B. $245,621;C. $251,409;D. $258,319;E. $266,498;33. You are scheduled to receive annual payments of;$4,800 for each of the next 7 years. The discount rate is 8 percent. What is;the difference in the present value if you receive these payments at the;beginning of each year rather than at the end of each year?;A. $1,999;B. $2,013;C. $2,221;D. $2,227;E. $2,304;34. You are comparing two annuities with equal present;values. The applicable discount rate is 8.75 percent. One annuity pays $5,000;on the first day of each year for 20 years. How much does the second annuity;pay each year for 20 years if it pays at the end of each year?;A. $5,211;B. $5,267;C. $5,309;D. $5,390;E. $5,438;35. Trish receives $480 on the first of each month.;Josh receives $480 on the last day of each month. Both Trish and Josh will;receive payments for next three years. At a 9.5 percent discount rate, what is;the difference in the present value of these two sets of payments?;A. $118.63;B. $121.06;C. $124.30;D. $129.08;E. $132.50;36. What is the future value of $1,200 a year for 40;years at 8 percent interest? Assume annual compounding.;A. $301,115;B. $306,492;C. $310,868;D. $342,908;E. $347,267;37. What is the future value of $15,000 a year for 30;years at 12 percent interest?;A. $2,878,406;B. $3,619,990;C. $3,711,414;D. $3,989,476;E. $4,021,223;38. Alexa plans on saving $3,000 a year and expects to;earn an annual rate of 10.25 percent. How much will she have in her account at;the end of 45 years?;A. $1,806,429;B. $1,838,369;C. $2,211,407;D. $2,333,572;E. $2,508,316;39. Theresa adds $1,000 to her savings account on the;first day of each year. Marcus adds $1,000 to his savings account on the last;day of each year. They both earn 6.5 percent annual interest. What is the;difference in their savings account balances at the end of 35 years?;A. $8,062;B. $8,113;C. $8,127;D. $8,211;E. $8,219;40. You are borrowing $17,800 to buy a car. The terms;of the loan call for monthly payments for 5 years at 8.6 percent interest. What;is the amount of each payment?;A. $287.71;B. $291.40;C. $301.12;D. $342.76;E. $366.05;41. You borrow $165,000 to buy a house. The mortgage;rate is 7.5 percent and the loan period is 30 years. Payments are made monthly.;If you pay the mortgage according to the loan agreement, how much total;interest will you pay?;A. $206,408;B. $229,079;C. $250,332;D. $264,319;E. $291,406;42. Holiday Tours (HT) has an employment contract with;its newly hired CEO. The contract requires a lump sum payment of $10.4 million;be paid to the CEO upon the successful completion of her first three years of;service. HT wants to set aside an equal amount of money at the end of each year;to cover this anticipated cash outflow and will earn 5.65 percent on the funds.;How much must HT set aside each year for this purpose?;A. $3,184,467;B. $3,277,973;C. $3,006,409;D. $3,318,190;E. $3,466,667;43. Nadine is retiring at age 62 and expects to live;to age 85. On the day she retires, she has $348,219 in her retirement savings;account. She is somewhat conservative with her money and expects to earn 6;percent during her retirement years. How much can she withdraw from her;retirement savings each month if she plans to spend her last penny on the;morning of her death?;A. $1,609.92;B. $1,847.78;C. $1,919.46;D. $2,116.08;E. $2,329.05;44. Kingston Development Corp. purchased a piece of;property for $2.79 million. The firm paid a down payment of 15 percent in cash;and financed the balance. The loan terms require monthly payments for 15 years;at an annual percentage rate of 7.75 percent, compounded monthly. What is the;amount of each mortgage payment?;A. $22,322.35;B. $23,419.97;C. $23,607.11;D. $24,878.15;E. $25,301.16;Amount financed = $2,790,000? (1 - 0.15) = $2,371,500;45. You estimate that you will owe $42,800 in student;loans by the time you graduate. The interest rate is 4.25 percent. If you want;to have this debt paid in full within six years, how much must you pay each;month?;A. $611.09;B. $674.50;C. $714.28;D. $736.05;E. $742.50;46. You are buying a previously owned car today at a;price of $3,500. You are paying $300 down in cash and financing the balance for;36 months at 8.5 percent. What is the amount of each loan payment?;A. $101.02;B. $112.23;C. $118.47;D. $121.60;E. $124.40;Amount financed = $3,500 - $300 = $3,200;47. Atlas Insurance wants to sell you an annuity which;will pay you $3,400 per quarter for 25 years. You want to earn a minimum rate;of return of 6.5 percent. What is the most you are willing to pay as a lump sum;today to buy this annuity?;A. $151,008.24;B. $154,208.16;C. $167,489.11;D. $173,008.80;E. $178,927.59;48. Your car dealer is willing to lease you a new car;for $245 a month for 48 months. Payments are due on the first day of each month;starting with the day you sign the lease contract. If your cost of money is 6.5;percent, what is the current value of the lease?;A. $10,331.03;B. $10,386.99;C. $12,197.74;D. $12,203.14;E. $13,008.31;49. Your great aunt left you an inheritance in the;form of a trust. The trust agreement states that you are to receive $3,600 on;the first day of each year, starting immediately and continuing for 20 years.;What is the value of this inheritance today if the applicable discount rate is;6.75 percent?;A. $38,890.88;B. $40,311.16;C. $41,516.01;D. $42,909.29;E. $43,333.33;50. You just received an insurance settlement offer;related to an accident you had six years ago. The offer gives you a choice of;one of the following three offers;You can earn 7.5 percent on your investments. You do not care if you personally;receive the funds or if they are paid to your heirs should you die within the;settlement period. Which one of the following statements is correct given this;information?;A. Option A is the best choice as it provides the largest monthly payment.;B. Option B is the best choice because it pays the largest total amount.;C. Option C is the best choice because it is has the largest current;value.;D. Option B is the best choice because you will receive the most payments.;E. You are indifferent to the three options as they are all equal in;value.;51. Samuelson Engines wants to save $750,000 to buy;some new equipment six years from now. The plan is to set aside an equal amount;of money on the first day of each quarter starting today. The firm can earn;4.75 percent on its savings. How much does the firm have to save each quarter;to achieve its goal?;A. $26,872.94;B. $26,969.70;C. $27,192.05;D. $27,419.29;E. $27,911.08;52. Stephanie is going to contribute $300 on the first;of each month, starting today, to her retirement account. Her employer will provide;a 50 percent match. In other words, her employer will contribute 50 percent of;the amount Stephanie saves. If both Stephanie and her employer continue to do;this and she can earn a monthly rate of 0.90 percent, how much will she have in;her retirement account 35 years from now?;A. $1,936,264;B. $1,943,286;C. $1,989,312;D. $2,068,418;E. $2,123,007;53. You are considering an annuity which costs;$160,000 today. The annuity pays $18,126 a year at an annual interest rate of;7.50 percent. What is the length of the annuity time period?;A. 12 years;B. 13 years;C. 14 years;D. 15 years;E. 16 years;54. Today, you borrowed $6,200 on your credit card to;purchase some furniture. The interest rate is 14.9 percent, compounded monthly.;How long will it take you to pay off this debt assuming that you do not charge;anything else and make regular monthly payments of $120?;A. 5.87 years;B. 6.40 years;C. 6.93 years;D. 7.23 years;E. 7.31 years;55. Meadow Brook Manor would like to buy some;additional land and build a new assisted living center. The anticipated total;cost is $23.6 million. The CEO of the firm is quite conservative and will only;do this when the company has sufficient funds to pay cash for the entire;construction project. Management has decided to save $1.2 million a quarter for;this purpose. The firm earns 6.25 percent, compounded quarterly, on the funds;it saves. How long does the company have to wait before expanding its;operations?;A. 4.09 years;B. 4.32 years;C. 4.46 years;D. 4.82 years;E. 4.91 years;56. Today, you are retiring. You have a total of;$411,016 in your retirement savings and have the funds invested such that you;expect to earn an average of 7.10 percent, compounded monthly, on this money;throughout your retirement years. You want to withdraw $2,500 at the beginning;of every month, starting today. How long will it be until you run out of;money?;A. 31.97 years;B. 34.56 years;C. 42.03 year;D. 48.19 years;E. You will never run out of money.;57. Gene's Art Gallery is notoriously known as a;slow-payer. The firm currently needs to borrow $27,500 and only one company;will even deal with them. The terms of the loan call for daily payments of;$100. The first payment is due today. The interest rate is 21.9 percent;compounded daily. What is the time period of this loan? Assume a 365 day;year.;A. 264.36 days;B. 280.81 days;C. 300.43 days;D. 316.46 days;E. 341.09 days

 

Paper#51093 | Written in 18-Jul-2015

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