Question
1. You deposit $1,700 at the end of each year into an account paying 10.1 percent interest per year. (a) How much money will you
1. You deposit $1,700 at the end of each year into an account paying 10.1 percent interest per year.
| (a) | How much money will you have in the account in 21 years? |
| A.124,360.49 B.97,658.21 C.47,413.57 D.35,700.00 E.110,126.66 |
| (b) | How much will you have if you make deposits for 42 years? |
| A.705,833.13 B.135,689.54 C.71,400.00 D.940,792.15 E.1,258,529.19 |
2. Find the EAR in each of the following cases.
| Required: | |
| (a) | 19% APR compounded quarterly |
| A.20.40% B.19.45% C.24.48% D.23.46% E.16.32% | |
| (b) | 13% APR compounded monthly |
| A.13.36% B.14.84% C.15.18% D.12.42% E.13.80% |
| (c) | 10% APR compounded daily |
| A.11.57% B.10.52% C.10.25% D.11.30% E.9.46% |
| (d) | 16% APR with infinite (or continuous) compounding |
| A.16.66% B.18.65% C.17.35% D.19.09% E.15.62% |
| 3. Find the APR, or stated annual rate, in each of the following cases. |
| a)An effective annual interest of 10% (the APR is compounded weekly)
|
| b) | An effective annual interest of 16% with infinite (or continuous) compounding |
| A.16.33% B.15.96% C.13.36% D.16.64% E.14.84% |
4.Barcain Credit Corp. wants to earn an effective annual return (EAR) on its consumer loans of 13 percent per year. The bank uses daily compounding on its loans.
| Required: |
| What interest rate is the bank required by law to report to potential borrowers (i.e. what is the APR under daily compounding)? A. 13.45% B. 13.88% C. 12.22% D. 11.00% E. 13.00% |
5.
| What is the future value of $700 in 20 years assuming an interest rate of 12 percent APR, compounded semiannually? |
A. $7,200.00
B. $874.71
C. $6,840.00
D. $6,752.41
E. $1,008.71
6. An investment will pay you $24,000 in 8 years. The appropriate discount rate is 7 percent APR, compounded daily. Assume that there are 365 days in a year.
What is the present value?
A. $13,709.75
B. $14,395.24
C. $14,121.05
D. $13,024.27
E. $13,968.22
7. Live Forever Life Insurance Co. is selling a perpetuity contract that pays $1,050 monthly. The contract currently sells for $72,000.
| (a) | What is the monthly effective return on this investment vehicle? |
| A.1.24% B.68.57% C.1.46% D.1.68% E.1.75% |
| (b) | What is the APR? (Do not round your intermediate calculations.) |
| A.16.24% B.15.75% C.19.25% D.18.38% E.17.50% |
| (c) | What is the effective annual rate (EAR)? (Do not round your intermediate calculations.) |
| A.18.03% B.20.87% C.19.92% D.17.08% E.18.97% |
8. You are planning to make monthly deposits of $150 into a retirement account that pays 13 percent annual interest (APR), compounded monthly. If your first deposit will be made one month from now, how large will your retirement account be in 20 years?
A.$2,039,836.24
B. $161,487.04
C. $145,704.29
D. $178,485.67
E. $169,986.35
9. You're prepared to make monthly payments of $300, beginning at the end of this month, into an account that pays 7 percent annual interest (APR), compounded monthly.
How many payments will you have made when your account balance reaches $18,569? (Do not round your intermediate calculations.)
A.58.3
B. 53
C. 24.74
D. 4.56
E. 47.7
10. You want to buy a new sports car from Muscle Motors for $40,000. The loan contract is in the form of a 36-month annuity "due" at a 7.50 percent APR, under monthly compounding.
What will your monthly payment be?
A. $1,244.25
B. $1,236.52
C. $1,211.79
D. $1,174.69
E. $1,261.25
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Introduction To Financial Models For Management And Planning
Authors: James R Morris, John P Daley
2nd Edition
1498765041, 9781498765046
