1. You plan to fund your individual retirement account (IRA) with the contribution of

$6,000 at the beginning of each year for the next 30 years. If the annual interest rate is

5%, how much will he have at the end of the 30th year?

A. $207,900

B. $398,633

C. $418,564

D. none of the above; the correct answer is ____

2. A generous benefactor to the university plans to make a one-time endowment which

would provide the school with $15,000 scholarship per year into perpetuity. The rate of

interest is expected to be 6% for all future time periods. How large must the endowment be?

A. $ 90,000

B. $150,000

C. $250,000

D. none of the above; the correct answer is _____

3. In order to help you through college, your parents deposited $100,000 into a bank account

paying 3% annual interest. You plan to withdraw equal amounts from the account at the end of

each of the next four years. What is the maximum amount you can withdraw annually?

A. $24,271

B. $26,119

C. $26,902

D. none of the above; the correct answer is _____

4. Brian has a choice between two credit cards. Credit card X has an annual interest rate of

16.5% with interest compounded seminally. Credit card Y has an annual interest rate of 16%

with interest compounded daily. Brian will choose credit card ____, with effective interest

rate ___.

A. X; 17.18 %

B. X, 17.93%

C. Y; 16.64%

D. Y; 17.35%

5. How long would it take for you to save an adequate amount for retirement if you deposit

$10,000 per year into an account at the end of each year that pays 8% interest rate per year if

you wish to have a total of $1,000,000 at retirement?

A. 20years

B. 28 years

C. 36 years

D. None of the above; the correct answer is ____

6. You want to put some money for your childs college education. College will cost $100,000

after 20 years. You can earn 4% annual interest rate, how much do you need to invest today?

A. $45,638

B. $55,556

C. $59,523

D. None of the above; the correct answer is ____

7. A new car can be purchased by paying cash $45,000 now, or by the term offered by dealer

as 60 equal monthly payment of $1,000 each month. What monthly interest rate implied

by the dealer offer?

A. 0.67 %

B. 1.00 %

C. 1.27 %

D. none of the above; the correct answer is ______

8. A steel company has an obligation to pay $10 million 20 years from now. What must be the

annual contribution of the company to a sinking fund which will redeem this obligation?

Assume the sinking fund money is invested at 6% annually.

A. $271,845

B. $571,845

C. $871,845

D. none of the above; the correct answer is _____.

9. A corporation borrows $10,000,000 at 5 percent annual rate of interest. The firm has a 25%

tax rate. The companys after tax -saving interest rate is _____

A. 1.25%

B. 3.75%

C. 6.25%

D. None of the above; the correct answer is ____

10. You deposit $100,000 into a bank account which offers 2% annual interest rate. How long

will it take to have your money double in the account?

A. 12 years

B. 20 years

C. 35 years

D. none of the above; the correct answer is ________

11. To pay for his college education, Tom is saving $1,000 at the end of each month for the next

five years in a bank account. If the annual interest rate is 3%, and compounded monthly, how

much will Tom have in that account at the end of 5th year?

A. $63,709

B. $64,646

C. $69,556

D. none of the above; the correct answer is _____

12. While negotiating a loan for $100,000 due in 10 years, a lender quotes a rate of 6%.

The borrower would prefer the 6% to be compounded

A. annually

B. monthly

C. quarterly

D. daily

II. (1) Five years ago, the medium housing price at Los Angeles county was $350,000, and it is

$540,000 now. How much is the annual compounded growth rate in housing price?

(2) In the previous question, if the housing price will increase at the same growth rate in the following 3 years, what will be the medium housing price at Los Angeles county after 3 years? Show your calculations (10 points)

III. You have been given a choice between two retirement policies.

Policy A: you will receive equal annual payments of $37,000 at the end of year for the following

20 years,

Policy B: you will receive one lump-sum of $500,000 now.

(1) At what interest rate would you be indifferent in choosing between the two policies.

(2) At what interest rate, will you choose Policy A? At what interest rate will you choose Policy B?

(3) If you expect to be able to earn 6% annually on your investment over the next 20 years, which policy should you take? Why? Show your calculations (12 points)

IV. John plans to borrow $400,000 15 years mortgage loan from his bank, which agrees that

John should repay the loan in 180 equal end-of-month payments. The annual interest rate is

2.5 %,compounded monthly.

(1) What is the amount of each monthly payment? Show your calculation.

(2) How much total interest dollar amount will John pay over the 15- year life of the loan?

Show your calculation

(3) Complete the following loan amortization schedule for the first 6 months and the last

month. `Rounding amounts to the nearest dollar (18 points)

Month	Beginning Balance	Monthly Payment	Dollar Interest	Principal Payoff	Ending Balance
1	$400,000
2
3
4
5
6
180