16) You are comparing three investments. Investment A pays 6.2 percent compounded semiannually. Investment B pays 6.1 percent compounded monthly. Investment C pays 6.0 percent compounded daily. Which investment should you choose if you wish to invest your money for 25 years? Why?

A; because it has the highest APR

A; because it has the highest EAR

B; because it has the highest EAR

C; because it has the most compounding periods

C; because it has the highest APR

2) A project will produce cash flows of $6,100, $7,800, $9,200, and $4,800 over the next 4years, respectively. What is the present value of these cash flows at a 6.5 percent discount rate?

$18,418.67

$18,511.16

$21,409.18

$23,226.09

$23,952.00

10) Scott just won a state lottery with a grand prize of $250,000. The lottery stipulates that the winner will receive $25,000 a year for 10 years with the first payment being paid today. If Scott can earn 8.6 percent on his money, how much is this prize worth to him today?

$138,911

$146,600

$158,206

$169,602

$177,350

19) You are borrowing $230,000 for 30 years at 7.8 percent compounded monthly to purchase a home. What is the EAR on this loan?

7.67 percent

7.80 percent

7.88 percent

7.95 percent

8.08 percent

29) Klaus Toy Makers needs to expand their wood shop. The supplier of the equipment has furnished estimates for the necessary equipment of $1.2 million if purchased today or $1,399,700 if purchased 2 years from now. Your supplier is expecting annual price increases of approximately _____ percent. Base your answer on the future value of $1 table below.

Interest Rate

Period7%8%9%10%

11.07001.08001.09001.1000

21.14491.16641.18811.2100

31.22501.25971.29501.3310

7.0 percent

7.5 percent

8.0 percent

9.0 percent

10.0 percent