7) Colin has inherited $6,000 from his grandmother. He would like to invest this money for two years and then use the proceeds from that investment to buy a new high-end gaming computer for $7,000. How much money will Colin have to buy the computer if he deposits his money in an account paying 8 percent compounded semiannually?

8) Which of the following is TRUE of annuities?

A) An ordinary annuity is an equal payment paid or received at the beginning of each period.

B) An annuity due is a payment paid or received at the beginning of each period that increases by an equal amount each period.

C) An annuity due is an equal stream of cash flows that is paid or received at the beginning of each period.

D) An ordinary annuity is an equal payment paid or received at the end of each period that increases by an equal amount each period.

9) Dan plans to fund his individual retirement account (IRA) by contributing $2,000 at the end of each year for the next 10 years. If Dan can earn 10 percent on his contributions, how much will he have at the end of the tenth year?

A) $12,289

B) $20,000

C) $31,875

D) $51,880

10) The present value of an ordinary annuity of $2,350 each year for eight years, assuming an opportunity cost of 11 percent, is ________.

A) $30,935

B) $27,870

C) $13,424

D) $12,093

11) A generous benefactor to a local ballet plans to make a one-time endowment that would provide the ballet with $150,000 per year into perpetuity. The rate of interest is expected to be 5 percent for all future time periods. How large must the endowment be?

A) $300,000

B) $3,000,000

C) $750,000

D) $1,428,571