1. How much interest would you pay on a loan if you bought a car for $30,000 that was fully financed with a 5.5% auto loan that lasted 6 years (assuming that you make payments annually)?

$7,913

$6,032

$7,500

$2,475

$14,850

1. Robert just won the lottery and he has the choice of taking a lump sum for $43,300,000 now or receiving a $10,000,000 payment every year for the next 5 years. If interest rates are 7%, what option should he take?

Payments because the PV of the payments is worth $76,362 more than the lump sum

Payments because the PV of the payments is worth $1,176,362 more than the lump sum

Lump Sum as this option is worth $2,298,026 more than the PV of the payments

There is no difference between the two options

Lump Sum as this option is worth $76,362 more than the PV of the payments

1. Dave currently has $350,000 saved for retirement and plans to retire in 20 years. During the 20 years until he retires, he plans to save an additional $10,000 per year. If his retirement account will earn a 6% return, how much will he have when he retires?

$791,455

$1,490,353

$1,123,822

$799,855

$1,683,028

1. Kawaski wants to buy a new car and can afford making annual payments of $7,000. His bank has offered to lend him money at 4% for 5 years. He also has $10,000 that he can use as a down payment in addition to the loan amount. How much can Kawaski afford to pay for his new car?

$23,010

$36,990

$41,163

$38,190

$30,000

1. Fill inthe blank: ______is the currentvalueof a future sum of money or stream of cash flows given a specified rate of return

Interest

Payback period

Present value

Dividend

Future value