5)

Your 25-year old younger sister started smoking. She is currently paying $24.00 per carton per week. You explain to her that this is $1248 per year ($24 x 52). She says big deal. You then tell her that if she were to save that same amount and invest it in the stock market, she would have a significant amount of money to retire when she turns 65. Your sister wants to know how much she would have. You know that over the long-term, the stock market has returned 12% interest compounded annually. You tell your sister that if she stops smoking she will have_________ when she retires.

$9,573

$95,732

$957,328

There is no way that $24.00 per week will equal a,b, or c above.

6)

In 1950, Jack-in-the-Box hamburger cost $0.24. In 1994, a Jack-in-the-Box hamburger cost $2.79. What is the effective annual increase in the price of a Jack-in-the-Box hamburger from 1950 to 1994?

5.73%

7.53%

3.75%

None of the above

7)

Sam refuses to retire until his retirement account has a balance of at least $300,000. Sam refuses to make any more deposits in the account. The account currently has a balance of $200,000 and earns 6% per year, compounded semi-annually. How long does Sam have before he will retire?

8.66 years

6.86 years

3.86 years

None of the answers given is correct

8)

If you lend your younger brother $500 for a tattoo of "ECU" across the middle of his forehead and he agrees to pay you back in five years at an annually compounded rate of 10%, how much will you collect at the end of year 5?

		$80.55
		$805.50
		$8055.00
		$550.80
		Since your brother has never repaid you in the past, you do not expect to collect in 5 years.