1) $1,200 is deposited today into an account paying 6% interest compounded semiannually. How much interest will have been earned after 25 years?
A) $3,950.24
B) $1,312.53
C) $20,904.19
D) $5,260.69
E) $4,060.69
2) If the present value of a perpetual income stream is increasing, the discount rate must be:
A) Increasing
B) Decreasing
C) Changing unpredictably
D) Keeping pace with inflation
3) The price of a Wendy's Bacon Cheeseburger is $.99, the same as it was five years ago. Had the price of this sandwich increased at the same 3% annual rate as U.S. consumer prices did over the last five years, what would its price be today?
A) $1.15
B) $1.02
C) $1.12
D) $1.22
E) $ .84
4) At an effective annual interest rate of 20%, how many years will it take a given amount to triple in value? (Round to the closest year.)
A) 5
B) 8
C) 6
D) 10
E) 9
5) If you presently have $6,000 invested at a rate of 15%, how many years will it take for you investment to triple? (Round up to obtain a whole number of years if necessary.)
A) 2
B) 4
C) 6
D) 8
E) 10
6) A college received a contribution to its endowment fund of $2 million. They can never touch the principal, but they can use the earnings. At an assumed interest rate of 9.5 percent, how much can the college earn to help its operations each year?
A) $95,000
B) $19,000
C) $190,000
D) $18,000
E) $9,500
7) A bank pays a quoted annual (nominal) interest rate of 8%. However, it pays interest (compounded) daily using a 365-day year. What is the effective annual rate of return?
A) 7.86%
B) 7.54%
C) 8.57%
D) 8.33%
E) 9.21%
8) You plan to invest $2,500 in a money market account which will pay an annual stated (nominal) interest rate of 8.75%, but which compounds interest on a weekly basis. If you leave this money on deposit for one year (52 weeks), what will be your ending balance when you close the account?
A) $2,583.28
B) $2,611.72
C) $2,681.00
D) $2,703.46
E) $2,728.40
9) You have just borrowed $20,000 to buy a new car. The loan agreement calls for 60 monthly payments of $444.89 each to begin one month from today. If the interest is compounded monthly, then what is the effective annual rate on this loan?
A) 12.68%
B) 14.12%
C) 12.00%
D) 13.25%
E) 15.08%
10) The future value of $200 received today and deposited at 8 percent compounded semi-annually for three years is:
A) $380
B) $158
C) $253
D) $252
E) $248
11) $1,200 is received at the beginning of year 1, $2,200 is received at the beginning of year 2, and $3,300 is received at the beginning of year 3. If these cash flows are deposited at 12 percent, their combined future value at the end of year 3 is:
A) $6,700
B) $17,000
C) $12,510
D) $7,504
E) $8,141
12) Bank A offers a 2-year certificate of deposit (CD) that pays 10 percent compounded annually. Bank B offers a 2-year CD that is compounded semi-annually. The CDs have identical risk. What is the stated, or nominal, rate that Bank B would have to offer to make you indifferent between the two investments?
A) 9.67%
B) 9.76%
C) 9.83%
D) 9.87%
E) 9.93%
13) Assume you are to receive a 20-year annuity with annual payments of $50. The first payment will be received at the end of Year 1, and the last payment will be received at the end of Year 20. You will invest each payment in an account that pays 10%. What will be the value in your account at the end of Year 30?
A) $6,354.81
B) $7,427.83
C) $7,922.33
D) $8,591.00
E) $6,752.46
14) Tony plans to deposit $1,000 at the end of each of the next three years. If his funds earn 5% compounded annually, how much will he have at the end of three years?
A) $3,150.00
B) $3,175.50
C) $3,152.50
D) $3,500.00
E) $4,310.10
15) Joe expects to start working immediately after graduation and he is already planning to retire. He wants to retire in twenty-five years and hopes that he will be able to do so comfortably by investing $2,000 at the end of each year throughout this period. If he earns 5% compounded annually, how much will be in his retirement fund in twenty-five years?
A) $95,454.20
B) $54,000.00
C) $169,317.75
D) $102,226.00
E) $76,345.93
16) Gina has planned to start college education in four years from now. To pay for her college education, she has decided to save $1,000 a quarter for the next four years in a bank account paying 12 percent interest (compounded quarterly). How much will she have at the end of fourth year? (Round to the nearest whole dollar)
A) $1,574
B) $19,116
C) $20,157
D) $16,000
17) You just won the Sweepstakes and have decided to take your winning in 15 equal payments of $35,000. You decide to save all of this money for your retirement and deposit it into an account that earns 11% per year. What is the amount of your retirement nest egg? (Round to the nearest whole dollar)
A) $1,204,188
B) $1,032,161
C) $1,112,037
D) $557,810
E) $852,225
18) The future value of a $10,000 annuity deposited at 12 percent compounded annually for each of next 5 years is: (Round to the nearest whole dollar)
A) $36,050
B) $71,154
C) $40,376
D) $63,528
19) You are expecting to receive $70 per year at the end of each of the next five years. If you invest the money in account that pays 5%, then how much interest will you earn over the five years? (Round to the nearest whole dollar)
A) $37
B) $18
C) $75
D) $350
E) $387
20) Bill plans to fund his individual retirement account (IRA) with a maximum contribution of $2,000 at the end of each year for the next 20 years. If Bill can earn 12 percent on his contributions, how much will he have at the end of twentieth year? (Round to the nearest whole dollar)
A) $19,292
B) $14,938
C) $40,000
D) $144,105
E) $44,800