Question
1. An investment pays $400 in one year, X amount of dollars in two years, and $500 in three years. The total present value of
1. An investment pays $400 in one year, X amount of dollars in two years, and $500 in three years. The total present value of all the cash flows (including X) is equal to $1,500. If i is 6 percent, what is X?
A. $749.67 B. $789.70 C. $600.00 D. $822.41 E. $702.83
2. An insurance company is trying to sell you a retirement annuity. The annuity will give you 20 payments with the first payment in 12 years when you retire. The insurance firm is asking you to pay $50,000 today. If this is a fair deal, what must the payment amount be (to the dollar) if the interest rate is 8 percent?
A. $9,472 B. $10,422 C. $12,824 D. $5,093 E. $11,874
3. Upon graduating from college this year, you expect to earn $25,000 per year. If you get your MBA, in one year you can expect to start at $35,000 per year. Over the year, inflation is expected to be 5 percent. In today's dollars, how much additional (less) money will you make from getting your MBA (to the nearest dollar) in your first year?
A. $10,000 B. $8,750 C. $8,333 D. -$2,462 E. $9,524
4.Investment A pays 8 percent simple interest for 10 years. Investment B pays 7.75 percent compound interest for 10 years. Both require an initial $10,000 investment. The future value of A minus the future value of B is equal to ______________ (to the nearest penny).
A. -$3,094.67 B. $3,094.67 C. $1,643.32 D. $2,500.00 E. -$2,500.00
5.You buy a car for $38,000. You agree to a 60-month loan with a monthly interest rate of 0.55 percent. What is your required monthly payment?
A. $634.24 B. $745.29 C. $605.54 D. $764.07 E. None of the options
please break down. thank you.
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