Question
1.You inherit $300,000. You can receive the $300,000 in one lump sum payment today or, alternatively, receive two amounts: $110,000 in 6 months and $220,000
1.You inherit $300,000. You can receive the $300,000 in one lump sum payment today or, alternatively, receive two amounts: $110,000 in 6 months and $220,000 in 21 months from today. If you can earn 9% per annum compounding monthly on your monies, how much is the option to receive two payments worth (in present day value)?
Select one:
A. $372,420.21
B. $330,400.00
C. $293,228.76
D. $302,796.11
2. Jillie wants to buy a new car but can't afford it right away. She decides to put away $2329 today, $4000 at the end of year two and $3400 at the end of year three. If the interest rate is 14.9% per annum, compounded annually, then the amount she will have in exactly 3 years is closest to:
Select one:
a. $12213.69
b. $11528.89
c. $12767.30
d. $12720.29
3.Jack deposits the following amounts in a savings plan which pays 11.1% per annum, compounded monthly:
- $2826 today,
- $1400 at the end of year two and
- $900 at the end of year three.
The amount he will have in exactly 3 years is closest to:
Select one:
a. $6400.21
b. $6330.78
c. $5988.42
d. $6582.87
4.Which of the following is CORRECT? When discounting an amount to be received in one year's time at a rate that is quoted as 12% compounding quarterly, we can:
Select one:
A. Discount the amount using an effective monthly rate of 1% where the number of periods is 12.
B. Discount the amount using an effective annual rate (EAR) of (1+0.03)^4-1 =12.5509% where number of periods is 1.
C. Discount the amount using the annual rate of 12% where number of periods is 1.
D. None of the above
5.
A bank offers personal loans at 12.3%p.a compounding monthly. The effective annual rate of interest (EAR) is ( to the nearest two decimal places):
Select one:
a. 12.68%
b. 13.02%
c. 12.88%
d. 1.03%
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