QUESTION 8 Troy Skinner is one the pension fund manager at UMB Corporation anticipates that benefits of 1 million per year must be paid to retirees Retirements will not occur until 10 years from now Once benefits begin to be paid, they will extend until year 39 for a total of 30 payments What is the present value of the pension liability if the appropriate annual discount rate for plan liabilities is 5 percent compounded annually A 9,909,219 B 15,372,451 03 C 15,592,772 D 9,572,609 QUESTION 9 Lisa deposits $2,500 into an account paying 5 percent interest, compounded annually At the same time, Jill deposits $2,500 into an account paying 2 5 percent interest, compounded annually At the end of five years A Lisa will have earned more than twice the amount of interest that Jill earned B Lisa will have earned somewhere between 1 and 2 times the amount of interest that Jill earned C Lisa will have earned exactly twice the amount of interest as Jill earned QUESTION 10 You want to invest an amount of money today and receive back twice that amount in the future You expect to earn 6 percent interest Approximately how long must you wait for your investment to double in value A 6 years B 8 years C 12 years D 9 years QUESTION 11 Donald Jones invested $3,500 ten years ago with an insurance company that has paid him 2 percent simple interest on his funds Darla Ward invested $3,500 ten years ago in a fund that has paid her 2 percent interest, compounded annually How much more interest has Darla earned than Donald over the 10 years A $66 48 B $64 12 C $72 78 D $74 20 QUESTION 12 Which one of the following has the highest effective annual rate A 7 percent compounded semi annually B 7 percent compounded quarterly C 7 percent compounded annually D 7 percent compounded daily QUESTION 13 Your grandparents loaned you money at 0 5 percent interest per month The APR on this loan is percent and the EAR is percent A 6 09 and 6 00 B 6 17 and 6 09 C 6 00 and 6 14 D 6 00 and 6 17 QUESTION 14 The condominium at the beach that you want to buy costs $249,500 You plan to make a cash down payment of 20 percent and finance the balance over 10 years at 6 75 percent What will be the amount of your monthly mortgage payment A $2,809 10 B $3,287 46 C $3,412 67 D $2,291 89 QUESTION 15 You want to save $75 a month for the next 15 years and hope to earn an average rate of return of 14 percent How much more will you have at the end of the 15 years if you invest your money at the beginning of each month rather than the end of each month A $530 06 B $562 50 C $514 29 D $1,125 00 QUESTION 16 The following end of month payments of $400, $700, and $300, respectively, are due Given a stated annual interest rate of 3 60 percent, the minimum amount of money needed in an account today to satisfy these future payments is closest to A $1,387 B $1,308 C $1,391 QUESTION 17 Leo now turns her attention to other two UMB summer interns, Bill Jennings and Tim Kane Leo was wondering whether the interns know how to calculate annuity due, effective interest rate and annual percentage rate and asked Kane to solve the following problems One of the UMBs clients Rabu Hassan lives in Greece and was not sure whether she should invest her 100,000 in British pound or in the U S dollar Rabu was wondering which of the following investment option will yield highest value of her 100,000 CD 1 5 65 Compounded continuously CD 2 5 70 Compounded semi annually CD 3 5 66 Compounded quarterly CD 4 5 70 Compounded monthly A CD 4 B CD 1 C CD 3 D CD 2

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QUESTION 8 Troy Skinner is one the pension fund manager at UMB Corporation anticipates that benefits of 1 million per year must be paid to

QUESTION 8

Troy Skinner is one the pension fund manager at UMB Corporation anticipates that benefits of 1 million per year must be paid to retirees. Retirements will not occur until 10 years from now. Once benefits begin to be paid, they will extend until year 39 for a total of 30 payments. What is the present value of the pension liability if the appropriate annual discount rate for plan liabilities is 5 percent compounded annually?

A.
9,909,219

B.
15,372,451.03

C.
15,592,772

D.
9,572,609
QUESTION 9

Lisa deposits $2,500 into an account paying 5 percent interest, compounded annually. At the same time, Jill deposits $2,500 into an account paying 2.5 percent interest, compounded annually. At the end of five years:

Lisa will have earned more than twice the amount of interest that Jill earned.

Lisa will have earned somewhere between 1 and 2 times the amount of interest that Jill earned.

Lisa will have earned exactly twice the amount of interest as Jill earned.

QUESTION 10

You want to invest an amount of money today and receive back twice that amount in the future. You expect to earn 6 percent interest. Approximately how long must you wait for your investment to double in value?

6 years

8 years

12 years

9 years

QUESTION 11: Donald Jones invested $3,500 ten years ago with an insurance company that has paid him 2 percent simple interest on his funds. Darla Ward invested $3,500 ten years ago in a fund that has paid her 2 percent interest, compounded annually. How much more interest has Darla earned than Donald over the 10 years?

A.
$66.48
B.
$64.12
C.
$72.78
D.
$74.20

QUESTION 12: Which one of the following has the highest effective annual rate?
A.
7 percent compounded semi-annually

B.
7 percent compounded quarterly

C.
7 percent compounded annually

D.
7 percent compounded daily
QUESTION 13: Your grandparents loaned you money at 0.5 percent interest per month. The APR on this loan is percent and the EAR is percent
A.
6.09 and 6.00

B.
6.17 and 6.09

C.
6.00 and 6.14

D.
6.00 and 6.17
QUESTION 14: The condominium at the beach that you want to buy costs $249,500. You plan to make a cash down payment of 20 percent and finance the balance over 10 years at 6.75 percent. What will be the amount of your monthly mortgage payment?
A.
$2,809.10
B.
$3,287.46
C.
$3,412.67
D.
$2,291.89
QUESTION 15: You want to save $75 a month for the next 15 years and hope to earn an average rate of return of 14 percent. How much more will you have at the end of the 15 years if you invest your money at the beginning of each month rather than the end of each month?
A.
$530.06

B.
$562.50

C.
$514.29

D.
$1,125.00
QUESTION 16: The following end of month payments of $400, $700, and $300, respectively, are due. Given a stated annual interest rate of 3.60 percent, the minimum amount of money needed in an account today to satisfy these future payments is closest to:
A.
$1,387

B.
$1,308

C.
$1,391
QUESTION 17: Leo now turns her attention to other two UMB summer interns, Bill Jennings and Tim Kane. Leo was wondering whether the interns know how to calculate annuity due, effective interest rate and annual percentage rate and asked Kane to solve the following problems.
One of the UMBs clients Rabu Hassan lives in Greece and was not sure whether she should invest her 100,000 in British pound or in the U.S. dollar? Rabu was wondering which of the following investment option will yield highest value of her 100,000?

CD-1

5.65%

Compounded continuously

CD-2

5.70%

Compounded semi-annually

CD-3

5.66%

Compounded quarterly

CD-4

5.70%

Compounded monthly

A.
CD-4
B.
CD-1
C.
CD-3
D.
CD-2