4. Suppose you inherited $275,000 and invested it at 8.50% per year. How much could you withdraw at the end of each of the next 20 years?

a. $28,532

b. $29,060

c. $31,457

d. $33,030

e. None of these

6. You have applied for a mortgage of $60,000 to finance the purchase of a new home. The bank will require you to make annual payments of $7,047.55 at the end of each of the next 20 years. Determine the interest rate in effect on this mortgage.

a. 8.0%

b. 9.8%

c. 10.0%

d. 11.2%

e. 12.4%

7. You have applied for a mortgage of $60,000 to finance the purchase of a new home. The bank will require you to make annual payments of $7,047.55 at the end of each of the next 20 years. How much principal will be repaid in the 2^nd year?

a. $1,152.30

b. $1,725.70

c. $2,275.20

d. $2,694.50

e. $2,895.60

8. A company is offering bonds that pay $100 per year indefinitely. If you require a 12% return on these bonds (that is, the discount rate is 12%), what is the value of each bond?

a. $1,000.00

b. $962.00

c. $904.67

d. $866.67

e. $833.33

9. Your company is planning to borrow $500,000 on a 5-year, 7%, annual payment, fully amortized term loan. What fraction of the payment made at the end of the 2^nd year will represent repayment of the principal?

a. 42.82%

b. 49.72%

c. 50.28%

d. 60.27%

e. 76.29%

10. Suppose you borrowed $12,000 at a rate of 7.50% and must repay it in 4 equal installments at the end of each of the next 4 years. How large would your payment be?

a. $3,582.81

b. $3,889.23

c. $4,083.69

d. $4,287.87

e. $4,502.26

11. You are considering investing in a bank account that pays a nominal annual rate of 14.03% compounded monthly. If you invest $3,000 at the end of each month, how many months will it take for your account to grow to $150,000?

a. 58.57

b. 44.00

c. 39.60

d. 48.40

e. 53.24