1--

A vintner is deciding when to release a vintage of sauvignon blanc. If it is bottled and released now, the wine will be worth

$2.6

million. If it is barrel aged for a further year, it will be worth

20%

more, though there will be additional costs of

$780,000

incurred at the end of the year. If the interest rate is 7%, what is the present value of the difference in the benefit the vintner will realize if he releases the wine after barrel aging it for one year or if he releases the wine now?

A.He will earn

$260,000

less if he releases the wine now.

B.He will earn

$364,000

more if he releases the wine now.

C.He will earn

$2,600,000

less if he releases the wine now.

D.He will earn

$413,084

more if he releases the wine now.

2--

What is the present value (PV) of

$ $60,000

received

tenten

years from now, assuming the interest rate is

44%

per year?

A.

$39,000

B.

$70,934

C.

$40,534

D.

$ $34,454

3--

What is the future value (FV) of

$50,000

in

sixsix

years, assuming the interest rate is

55%

per year?

A.

$60,304

B.

$67,005

C.

$56,954

D.

$32,500

4--

Jeff has the opportunity to receive lump-sum payments either now or in the future. Which of the following opportunities is the best, given that the interest rate is

77%

per year?

A.one that pays

$1,000

now

B.one that pays

$1,200

in two years

C.one that pays

$1,500

in five years

D.one that pays

$1,800

in ten years

5--

Sara wants to have

$530,000

in her savings account when she retires. How much must she put in the account now, if the account pays a fixed interest rate of

1010%,

to ensure that she has

$ 530,000

in

20

years time?

A.

$ $78,781

B.

$85,598

C.

$110,293

D.

$141,806

6--

On the day Harry was born, his parents put

$1,200

into an investment account that promises to pay a fixed interest rate of

44

percent per year. How much money will Harry have in this account when he turns

18?

A.

$2,431

B.

$1,945

C.

$2,327

D.

$4,862

7--

Your grandfather put some money into an account for you on the day you were born. You are now

18

years old and are allowed to withdraw the money. The account currently has

$8,113

in it and pays an interest rate of

11%.

a. How much money would be in the account if you left the money there until your 25th birthday?

b. What if you left the money until your 65th birthday?

c. How much money did your grandfather originally put into the account?

a. How much money would be in the account if you left the money there until your 25th birthday?

The amount that would be in the account if you left the money there until your 25th birthday would be

$nothing.

(Round to the nearest dollar.)

b. What if you left the money until your 65th birthday?

If you left the money in the account until your 65th birthday, the future value would be

$nothing.

(Round to the nearest dollar.)

c. How much money did your grandfather originally put into the account?

The amount of money your grandfather originally put into the account was

$nothing.

(Round to the nearest dollar.)