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羅斯公司理財(cái)Chap全英
文題庫及答案
LELEwasfinallyrevisedonthemorningofDecember16,2020
Chapter04DiscountedCashFlowValuationAnswerKey
MultipleChoiceQuestions
1.Anannuitystreamofcashflowpaymentsisasetof:
A.levelcashflowsoccurringeachtimeperiodforafixedlengthoftime.
B.levelcashflowsoccurringeachtimeperiodforever.
C.increasingcashflowsoccurringeachtimeperiodforafixedlengthoftime.
D.increasingcashflowsoccurringeachtimeperiodforever.
E.arbitrarycashflowsoccurringeachtimeperiodfornomorethan10years.
Difficultylevel:Easy
Topic:ANNUITY
Type:DEFINITIONS
2.Annuitieswherethepaymentsoccurattheendofeachtimeperiodarecalled_____,
whereas_____refertoannuitystreamswithpaymentsoccurringatthebeginningofeach
timeperiod.
A.ordinaryannuities;earlyannuities
B.lateannuities;straightannuities
C.straightannuities;lateannuities
D.annuitiesdue;ordinaryannuities
E.ordinaryannuities;annuitiesdue
Difficultylevel:Easy
Topic:ANNUITIESDUE
Type:DEFINITIONS
3.Anannuitystreamwherethepaymentsoccurforeveriscalleda(n):
A.annuitydue.
B.indemnity.
C.perpetuity.
D.amortizedcashflowstream.
E.amortizationtable.
Difficultylevel:Easy
Topic:PERPETUITY
Type:DEFINITIONS
4.Theinterestrateexpressedintermsoftheinterestpaymentmadeeachperiodiscalledthe
_____rate.
A.statedannualinterest
B.compoundannualinterest
C.effectiveannualinterest
D.periodicinterest
E.dailyinterest
Difficultylevel:Easy
Topic:STATEDINTERESTRATES
Type:DEFINITIONS
5.Theinterestrateexpressedasifitwerecompoundedonceperyeariscalledthe_____rate.
A.statedinterest
B.compoundinterest
C.effectiveannual
D.periodicinterest
E.dailyinterest
Difficultylevel:Easy
Topic:EFFECTIVEANNUALRATE
Type:DEFINITIONS
6.Theinterestratechargedperperiodmultipliedbythenumberofperiodsperyeariscalled
the_____rate.
A.effectiveannual
B.annualpercentage
C.periodicinterest
D.compoundinterest
E.dailyinterest
Difficultylevel:Easy
Topic:ANNUALPERCENTAGERATE
Type:DEFINITIONS
7.Payingofflong-termdebtbymakinginstallmentpaymentsiscalled:
A.foreclosingonthedebt.
B.amortizingthedebt.
C.fundingthedebt.
D.callingthedebt.
E.Noneoftheabove.
Difficultylevel:Easy
Topic:AMORTIZATION
Type:DEFINITIONS
8.Youarecomparingtwoannuitieswhichoffermonthlypaymentsfortenyears.Both
annuitiesareidenticalwiththeexceptionofthepaymentdates.AnnuityApaysonthefirstof
eachmonthwhileannuityBpaysonthelastdayofeachmonth.Whichoneofthefollowing
statementsiscorrectconcerningthesetwoannuities?
A.Bothannuitiesareofequalvaluetoday.
B.AnnuityBisanannuitydue.
C.AnnuityAhasahigherfuturevaluethanannuityB.
D.AnnuityBhasahigherpresentvaluethanannuityA.
E.Bothannuitieshavethesamefuturevalueasoftenyearsfromtoday.
Difficultylevel:Medium
Topic:ORDINARYANNUITYVERSUSANNUITYDUE
Type:CONCEPTS
9.Youarecomparingtwoinvestmentoptions.Thecosttoinvestineitheroptionisthesame
today.Bothoptionswillprovideyouwith$20,000ofincome.OptionApaysfiveannual
paymentsstartingwith$8,000thefirstyearfollowedbyfourannualpaymentsof$3,000each.
OptionBpaysfiveannualpaymentsof$4,000each.Whichoneofthefollowingstatementsis
correctgiventhesetwoinvestmentoptions?
A.Bothoptionsareofequalvaluegiventhattheybothprovide$20,000ofincome.
B.OptionAisthebetterchoiceofthetwogivenanypositiverateofreturn.
C.OptionBhasahigherpresentvaluethanoptionAgivenapositiverateofreturn.
D.OptionBhasalowerfuturevalueatyear5thanoptionAgivenazerorateofreturn.
E.OptionAispreferablebecauseitisanannuitydue.
Difficultylevel:Medium
Topic:UNEVENCASHFLOWSANDPRESENTVALUE
Type:CONCEPTS
10.Youareconsideringtwoprojectswiththefollowingcashflows:
Whichofthefollowingstatementsaretrueconcerningthesetwoprojects?
I.Bothprojectshavethesamefuturevalueattheendofyear4,givenapositiverateofreturn.
II.Bothprojectshavethesamefuturevaluegivenazerorateofreturn.
III.Bothprojectshavethesamefuturevalueatanypointintime,givenapositiverateof
return.
IV.ProjectAhasahigherfuturevaluethanprojectB,givenapositiverateofreturn.
A.IIonly
B.IVonly
C.IandIIIonly
D.IIandIVonly
E.I,II,andIIIonly
Difficultylevel:Medium
Topic:UNEVENCASHFLOWSANDFUTUREVALUE
Type:CONCEPTS
11.Aperpetuitydiffersfromanannuitybecause:
A.perpetuitypaymentsvarywiththerateofinflation.
B.perpetuitypaymentsvarywiththemarketrateofinterest.
C.perpetuitypaymentsarevariablewhileannuitypaymentsareconstant.
D.perpetuitypaymentsnevercease.
E.annuitypaymentsnevercease.
Difficultylevel:Easy
Topic:PERPETUITYVERSUSANNUITY
Type:CONCEPTS
12.Whichoneofthefollowingstatementsconcerningtheannualpercentagerateiscorrect?
A.Theannualpercentagerateconsidersinterestoninterest.
B.Therateofinterestyouactuallypayonaloaniscalledtheannualpercentagerate.
C.Theeffectiveannualrateislowerthantheannualpercentageratewhenaninterestrateis
compoundedquarterly.
D.Whenfirmsadvertisetheannualpercentageratetheyareviolating.truth-in-lendinglaws.
E.Theannualpercentagerateequalstheeffectiveannualratewhentherateonanaccountis
designatedassimpleinterest.
Difficultylevel:Medium
Topic:ANNUALPERCENTAGERATE
Type:CONCEPTS
13.Whichoneofthefollowingstatementsconcerninginterestratesiscorrect?
A.Thestatedrateisthesameastheeffectiveannualrate.
B.Aneffectiveannualrateistheratethatappliesifinterestwerechargedannually.
C.Theannualpercentagerateincreasesasthenumberofcompoundingperiodsperyear
increases.
D.Banksprefermorefrequentcompoundingontheirsavingsaccounts.
E.Foranypositiverateofinterest,theeffectiveannualratewillalwaysexceedtheannual
percentagerate.
Difficultylevel:Medium
Topic:INTERESTRATES
Type:CONCEPTS
14.Whichofthefollowingstatementsconcerningtheeffectiveannualratearecorrect?
I.Whenmakingfinancialdecisions,youshouldcompareeffectiveannualratesratherthan
annualpercentagerates.
II.Themorefrequentlyinterestiscompounded,thehighertheeffectiveannualrate.
III.Aquotedrateof6%compoundedcontinuouslyhasahighereffectiveannualratethanif
theratewerecompoundeddaily.
IV.Whenborrowingandchoosingwhichloantoaccept,youshouldselecttheofferwiththe
highesteffectiveannualrate.
A.IandIIonly
B.IandIVonly
C.I,II,andIIIonly
D.II,III,andIVonly
E.I,II,III,andIV
Difficultylevel:Medium
Topic:EFFECTIVEANNUALRATE
Type:CONCEPTS
15.Thehighesteffectiveannualratethatcanbederivedfromanannualpercentagerateof9%
iscomputedas:
A..09e-1.
B.q.
C.e(1+.09).
D.-1.
E.(1+.09)q.
Difficultylevel:Medium
Topic:CONTINUOUSCOMPOUNDING
Type:CONCEPTS
16.Thetimevalueofmoneyconceptcanbedefinedas:
A.therelationshipbetweenthesupplyanddemandofmoney.
B.therelationshipbetweenmoneyspentversusmoneyreceived.
C.therelationshipbetweenadollartobereceivedinthefutureandadollartoday.
D.therelationshipbetweeninterestratestatedandamountpaid.
E.Noneoftheabove.
Difficultylevel:Easy
Topic:TIMEVALUE
Type:CONCEPTS
17.Discountingcashflowsinvolves:
A.discountingonlythosecashflowsthatoccuratleast10yearsinthefuture.
B.estimatingonlythecashflowsthatoccurinthefirst4yearsofaproject.
C.multiplyingexpectedfuturecashflowsbythecostofcapital.
D.discountingallexpectedfuturecashflowstoreflectthetimevalueofmoney.
E.takingthecashdiscountofferedontrademerchandise.
Difficultylevel:Easy
Topic:CASHFLOWS
Type:CONCEPTS
18.Compoundinterest:
A.allowsforthereinvestmentofinterestpayments.
B.doesnotallowforthereinvestmentofinterestpayments.
C.isthesameassimpleinterest.
D.providesavaluethatislessthansimpleinterest.
E.BothAandD.
Difficultylevel:Easy
Topic:INTEREST
Type:CONCEPTS
19.Anannuity:
A.isadebtinstrumentthatpaysnointerest.
B.isastreamofpaymentsthatvarieswithcurrentmarketinterestrates.
C.isalevelstreamofequalpaymentsthroughtime.
D.hasnovalue.
E.Noneoftheabove.
Difficultylevel:Easy
Topic:ANNUITY
Type:CONCEPTS
20.Thestatedrateofinterestis10%.Whichformofcompoundingwillgivethehighest
effectiverateofinterest?
A.annualcompounding
B.monthlycompounding
C.dailycompounding
D.continuouscompounding
E.Itisimpossibletotellwithoutknowingthetermoftheloan.
Difficultylevel:Easy
Topic:COMPOUNDING
Type:CONCEPTS
21.Thepresentvalueoffuturecashflowsminusinitialcostiscalled:
A.thefuturevalueoftheproject.
B.thenetpresentvalueoftheproject.
C.theequivalentsumoftheinvestment.
D.theinitialinvestmentriskequivalentvalue.
E.Noneoftheabove.
Difficultylevel:Easy
Topic:PRESENTVALUE
Type:CONCEPTS
22.Findthepresentvalueof$5,325tobereceivedinoneperiodiftherateis%.
A.$5,
B.$5,
C.$5,
D.$5,
E.Noneoftheabove.
Difficultylevel:Easy
Topic:PRESENTVALUE-SINGLESUM
Type:PROBLEMS
23.Ifyouhaveachoicetoearnsimpleintereston$10,000forthreeyearsat8%orannually
compoundedinterestat%forthreeyearswhichonewillpaymoreandbyhowmuch?
A.Simpleinterestby$
B.Compoundinterestby$
C.Compoundinterestby$
D.Compoundinterestby$
E.Noneoftheabove.
SimpleInterest=$10,000(.08)(3)=$2,400;
CompoundInterest=$10,000(3-1)=$2,;
Difference=$2,-$2,400=$
Difficultylevel:Easy
Topic:SIMPLE&COMPOUNDINTEREST
Type:PROBLEMS
24.BradleySnapphasdeposited$7,000inaguaranteedinvestmentaccountwithapromised
rateof6%compoundedannually.Heplanstoleaveittherefor4fullyearswhenhewillmake
adownpaymentonacaraftergraduation.Howmuchofadownpaymentwillhebeableto
make?
A.$1,
B.$2,
C.$8,
D.$8,
E.$9,
$7,0004=$8,
Difficultylevel:Easy
Topic:FUTUREVALUE-SINGLESUM
Type:PROBLEMS
25.Yourparentsaregivingyou$100amonthforfouryearswhileyouareincollege.Ata6%
discountrate,whatarethesepaymentsworthtoyouwhenyoufirststartcollege?
A.$3,
B.$4,
C.$4,
D.$4,
E.$4,
Difficultylevel:Easy
Topic:ORDINARYANNUITYANDPRESENTVALUE
Type:PROBLEMS
26.Youjustwonthelottery!Asyourprizeyouwillreceive$1,200amonthfor100months.
Ifyoucanearn8%onyourmoney,whatisthisprizeworthtoyoutoday?
A.$87,
B.$87,
C.$87,
D.$88,
E.$90,
Difficultylevel:Easy
Topic:ORDINARYANNUITYANDPRESENTVALUE
Type:PROBLEMS
27.Toddisabletopay$160amonthforfiveyearsforacar.Iftheinterestrateis%,how
muchcanToddaffordtoborrowtobuyacar?
A.$6,
B.$8,
C.$8,
D.$8,
E.$9,
Difficultylevel:Easy
Topic:ORDINARYANNUITYANDPRESENTVALUE
Type:PROBLEMS
28.Youarethebeneficiaryofalifeinsurancepolicy.Theinsurancecompanyinformsyou
thatyouhavetwooptionsforreceivingtheinsuranceproceeds.Youcanreceivealumpsum
of$50,000todayorreceivepaymentsof$641amonthfortenyears.Youcanearn%onyour
money.Whichoptionshouldyoutakeandwhy?
A.Youshouldacceptthepaymentsbecausetheyareworth$56,today.
B.Youshouldacceptthepaymentsbecausetheyareworth$56,today.
C.Youshouldacceptthepaymentsbecausetheyareworth$56,today.
D.Youshouldacceptthe$50,000becausethepaymentsareonlyworth$47,today.
E.Youshouldacceptthe$50,000becausethepaymentsareonlyworth$47,today.
Difficultylevel:Medium
Topic:ORDINARYANNUITYANDPRESENTVALUE
Type:PROBLEMS
29.Youremployercontributes$25aweektoyourretirementplan.Assumethatyouworkfor
youremployerforanothertwentyyearsandthattheapplicablediscountrateis5%.Given
theseassumptions,whatisthisemployeebenefitworthtoyoutoday?
A.$13,
B.$15,
C.$16,
D.$16,
E.$16,
Difficultylevel:Medium
Topic:ORDINARYANNUITYANDPRESENTVALUE
Type:PROBLEMS
30.Youhaveasub-contractingjobwithalocalmanufacturingfirm.Youragreementcallsfor
annualpaymentsof$50,000forthenextfiveyears.Atadiscountrateof12%,whatisthisjob
worthtoyoutoday?
A.$180,
B.$201,
C.$210,
D.$223,
E.$224,
Difficultylevel:Medium
Topic:ORDINARYANNUITYANDPRESENTVALUE
Type:PROBLEMS
31.TheAjaxCo.justdecidedtosave$1,500amonthforthenextfiveyearsasasafetynet
forrecessionaryperiods.Themoneywillbesetasideinaseparatesavingsaccountwhich
pays%interestcompoundedmonthly.Itdepositsthefirst$1,500today.Ifthecompanyhad
wantedtodepositanequivalentlumpsumtoday,howmuchwouldithavehadtodeposit?
A.$82,
B.$83,
C.$83,
D.$83,
E.$84,
Difficultylevel:Medium
Topic:ANNUITYDUEANDPRESENTVALUE
Type:PROBLEMS
32.Youneedsomemoneytodayandtheonlyfriendyouhavethathasanyisyour'miserly
friend.Heagreestoloanyouthemoneyyouneed,ifyoumakepaymentsof$20amonthfor
thenextsixmonths.Inkeepingwithhisreputation,herequiresthatthefirstpaymentbepaid
today.Healsochargesyou%interestpermonth.Howmuchmoneyareyouborrowing?
A.$
B.$
C.$
D.$
E.$
Difficultylevel:Medium
Topic:ANNUITYDUEANDPRESENTVALUE
Type:PROBLEMS
33.Youbuyanannuitywhichwillpayyou$12,000ayearfortenyears.Thepaymentsare
paidonthefirstdayofeachyear.Whatisthevalueofthisannuitytodayata7%discount
rate?
A.$84,
B.$87,
C.$90,
D.$96,
E.$116,
Difficultylevel:Medium
Topic:ANNUITYDUEANDPRESENTVALUE
Type:PROBLEMS
34.Youarescheduledtoreceiveannualpaymentsof$10,000foreachofthenext25years.
Yourdiscountrateis%.Whatisthedifferenceinthepresentvalueifyoureceivethese
paymentsatthebeginningofeachyearratherthanattheendofeachyear?
A.$8,699
B.$9,217
C.$9,706
D.$10,000
E.$10,850
Difference=$111,-$102,=$8,=$8,699(rounded)
Note:Thedifference=.085
$102,=$8,
Difficultylevel:Medium
Topic:ORDINARYANNUITYVERSUSANNUITYDUE
Type:PROBLEMS
35.Youarecomparingtwoannuitieswithequalpresentvalues.Theapplicablediscountrate
is%.Oneannuitypays$5,000onthefirstdayofeachyearfortwentyyears.Howmuchdoes
thesecondannuitypayeachyearfortwentyyearsifitpaysattheendofeachyear?
A.$4,651
B.$5,075
C.$5,000
D.$5,375
E.$5,405
Becauseeachpaymentisreceivedoneyearlater,thenthecashflowhastoequal:$5,000
+.075)=$5,375
(1
Difficultylevel:Medium
Topic:ORDINARYANNUITYVERSUSANNUITYDUE
Type:PROBLEMS
36.Marthareceives$100onthefirstofeachmonth.Stewartreceives$100onthelastdayof
eachmonth.BothMarthaandStewartwillreceivepaymentsforfiveyears.Atan8%discount
rate,whatisthedifferenceinthepresentvalueofthesetwosetsofpayments?
A.$
B.$
C.$
D.$
E.$
Difference=$4,-$4,=$
Difficultylevel:Medium
Topic:ORDINARYANNUITYVERSUSANNUITYDUE
Type:PROBLEMS
37.Whatisthefuturevalueof$1,000ayearforfiveyearsata6%rateofinterest?
A.$4,
B.$5,
C.$5,
D.$6,
E.$6,
Difficultylevel:Easy
Topic:ORDINARYANNUITYANDFUTUREVALUE
Type:PROBLEMS
38.Whatisthefuturevalueof$2,400ayearforthreeyearsatan8%rateofinterest?
A.$6,
B.$6,
C.$7,
D.$7,
E.$8,
Difficultylevel:Easy
Topic:ORDINARYANNUITYANDFUTUREVALUE
Type:PROBLEMS
39.Janetplansonsaving$3,000ayearandexpectstoearn%.HowmuchwillJanethaveat
theendoftwenty-fiveyearsifsheearnswhatsheexpects?
A.$219,
B.$230,
C.$236,
D.$244,
E.$256,
Difficultylevel:Easy
Topic:ORDINARYANNUITYANDFUTUREVALUE
Type:PROBLEMS
40.Toniadds$3,000tohersavingsonthefirstdayofeachyear.Timadds$3,000tohis
savingsonthelastdayofeachyear.Theybothearna9%rateofreturn.Whatisthe
differenceintheirsavingsaccountbalancesattheendofthirtyyears?
A.$35,
B.$36,
C.$38,
D.$39,
E.$40,
Difference=$445,-$408,=$36,
Note:Difference=$408,
.09=$36,
Difficultylevel:Medium
Topic:ANNUITYDUEVERSUSORDINARYANNUITY
Type:PROBLEMS
41.Youborrow$5,600tobuyacar.Thetermsoftheloancallformonthlypaymentsforfour
yearsata%rateofinterest.Whatistheamountofeachpayment?
A.$
B.$
C.$
D.$
E.$
Difficultylevel:Easy
Topic:ORDINARYANNUITYPAYMENTS
Type:PROBLEMS
42.Youborrow$149,000tobuyahouse.Themortgagerateis%andtheloanperiodis30
years.Paymentsaremademonthly.Ifyoupayforthehouseaccordingtotheloanagreement,
howmuchtotalinterestwillyoupay?
A.$138,086
B.$218,161
C.$226,059
D.$287,086
E.$375,059
Totalinterest=($1,3012)-$149,000=$226,=$226,059(rounded)
Difficultylevel:Medium
Topic:ORDINARYANNUITYPAYMENTSANDCOSTOFINTEREST
Type:PROBLEMS
43.TheGreatGiantCorp.hasamanagementcontractwithitsnewlyhiredpresident.The
contractrequiresalumpsumpaymentof$25millionbepaidtothepresidentuponthe
completionofherfirsttenyearsofservice.Thecompanywantstosetasideanequalamount
offundseachyeartocoverthisanticipatedcashoutflow.Thecompanycanearn%onthese
funds.Howmuchmustthecompanysetasideeachyearforthispurpose?
A.$1,775,
B.$1,798,
C.$1,801,
D.$1,852,
E.$1,938,
Difficultylevel:Easy
Topic:ORDINARYANNUITYPAYMENTSANDFUTUREVALUE
Type:PROBLEMS
44.Youretireatage60andexpecttoliveanother27years.Onthedayyouretire,youhave
$464,900inyourretirementsavingsaccount.Youareconservativeandexpecttoearn%on
yourmoneyduringyourretirement.Howmuchcanyouwithdrawfromyourretirement
savingseachmonthifyouplantodieonthedayyouspendyourlastpenny?
A.$2,
B.$2,
C.$2,
D.$2,
E.$2,
Difficultylevel:Medium
Topic:ORDINARYANNUITYPAYMENTSANDPRESENTVALUE
Type:PROBLEMS
45.TheMcDonaldGrouppurchasedapieceofpropertyfor$million.Itpaidadownpayment
of20%incashandfinancedthebalance.Theloantermsrequiremonthlypaymentsfor15
yearsatanannualpercentagerateof%compoundedmonthly.Whatistheamountofeach
mortgagepayment?
A.$7,
B.$8,
C.$9,
D.$9,
E.$9,
Amountfinanced=$1,200,000
(1-.2)=
$960,000
Difficultylevel:Medium
Topic:ORDINARYANNUITYPAYMENTSANDPRESENTVALUE
Type:PROBLEMS
46.Youestimatethatyouwillhave$24,500instudentloansbythetimeyougraduate.The
interestrateis%.Ifyouwanttohavethisdebtpaidinfullwithinfiveyears,howmuchmust
youpayeachmonth?
A.$
B.$
C.$
D.$
E.$
Difficultylevel:Medium
Topic:ORDINARYANNUITYPAYMENTSANDPRESENTVALUE
Type:PROBLEMS
47.Youarebuyingapreviouslyownedcartodayatapriceof$6,890.Youarepaying$500
downincashandfinancingthebalancefor36monthsat%.Whatistheamountofeachloan
payment?
A.$
B.$
C.$
D.$
E.$
Amountfinanced=$6,890-$500=
$6,390
Difficultylevel:Medium
Topic:ORDINARYANNUITYPAYMENTSANDPRESENTVALUE
Type:PROBLEMS
48.TheGoodLifeInsuranceCo.wantstosellyouanannuitywhichwillpayyou$500per
quarterfor25years.Youwanttoearnaminimumrateofreturnof%.Whatisthemostyou
arewillingtopayasalumpsumtodaytobuythisannuity?
A.$26,
B.$27,
C.$27,
D.$28,
E.$28,
Difficultylevel:Medium
Topic:ORDINARYANNUITYPAYMENTSANDPRESENTVALUE
Type:PROBLEMS
49.Yourcardealeriswillingtoleaseyouanewcarfor$299amonthfor60months.
Paymentsaredueonthefirstdayofeachmonthstartingwiththedayyousignthelease
contract.Ifyourcostofmoneyis%,whatisthecurrentvalueofthelease?
A.$15,
B.$15,
C.$15,
D.$16,
E.$16,
Difficultylevel:Medium
Topic:ANNUITYDUEPAYMENTSANDPRESENTVALUE
Type:PROBLEMS
50.Yourgreat-auntleftyouaninheritanceintheformofatrust.Thetrustagreementstates
thatyouaretoreceive$2,500onthefirstdayofeachyear,startingimmediatelyand
continuingforfiftyyears.Whatisthevalueofthisinheritancetodayiftheapplicablediscount
rateis%
A.$36,
B.$37,
C.$39,
D.$39,
E.$40,
Difficultylevel:Medium
Topic:ANNUITYDUEPAYMENTSANDPRESENTVALUE
Type:PROBLEMS
51.Beatriceinvests$1,000inanaccountthatpays4%simpleinterest.Howmuchmorecould
shehaveearnedoverafive-yearperiodiftheinteresthadcompoundedannually?
A.$
B.$
C.$
D.$
E.$
Endingvalueat4%simpleinterest=$1,000+($1,000.045)=$1,;Endingvalueat4%
compoundedannually=$1,000(1+.04)5=$1,;
Difference=$1,-$1,=$
Difficultylevel:Easy
Topic:SIMPLEVERSUSCOMPOUNDINTEREST
Type:PROBLEMS
52.Yourfirmwantstosave$250,000tobuysomenewequipmentthreeyearsfromnow.The
planistosetasideanequalamountofmoneyonthefirstdayofeachyearstartingtoday.The
firmcanearna%rateofreturn.Howmuchdoesthefirmhavetosaveeachyeartoachieveits
goal?
A.$75,
B.$76,
C.$78,
D.$
E.$83,
Difficultylevel:Medium
Topic:ANNUITYDUEPAYMENTSANDFUTUREVALUE
Type:PROBLEMS
53.TodayisJanuary1.Startingtoday,Samisgoingtocontribute$140onthefirstofeach
monthtohisretirementaccount.Hisemployercontributesanadditional50%oftheamount
contributedbySam.IfbothSamandhisemployercontinuetodothisandSamcanearna
monthlyrateof?of1percent,howmuchwillhehaveinhisretirementaccount35years
fromnow?
A.$199,
B.$200,
C.$249,
D.$299,
E.$300,
Difficultylevel:Medium
Topic:ANNUITYDUEPAYMENTSANDFUTUREVALUE
Type:PROBLEMS
54.Youareconsideringanannuitywhichcosts$100,000today.Theannuitypays$6,000a
year.Therateofreturnis%.Whatisthelengthoftheannuitytimeperiod?
A.years
B.years
C.years
D.years
E.years
Difficultylevel:Medium
Topic:ORDINARYANNUITYTIMEPERIODSANDPRESENTVALUE
Type:PROBLEMS
55.Today,yousignedloanpapersagreeingtoborrow$4,at9%compoundedmonthly.The
loanpaymentis$amonth.Howmanyloanpaymentsmustyoumakebeforetheloanispaid
infull?
A.
B.
C.
D.
E.
Difficultylevel:Medium
Topic:ORDINARYANNUITYTIMEPERIODSANDPRESENTVALUE
Type:PROBLEMS
56.WinstonEnterpriseswouldliketobuysomeadditionallandandbuildanewfactory.The
anticipatedtotalcostis$136million.Theownerofthefirmisquiteconservativeandwill
onlydothiswhenthecompanyhassufficientfundstopaycashfortheentireexpansion
project.Managementhasdecidedtosave$450,000amonthforthispurpose.Thefirmearns
6%compoundedmonthlyonthefundsitsaves.Howlongdoesthecompanyhavetowait
beforeexpandingitsoperations?
A.months
B.months
C.months
D.months
E.months
Difficultylevel:Medium
Topic:ORDINARYANNUITYTIMEPERIODSANDFUTUREVALUE
Type:PROBLEMS
57.Today,youareretiring.Youhaveatotalof$413,926inyourretirementsavingsandhave
thefundsinvestedsuchthatyouexpecttoearnanaverageof3%,compoundedmonthly,on
thismoneythroughoutyourretirementyears.Youwanttowithdraw$2,500atthebeginning
ofeverymonth,startingtoday.Howlongwillitbeuntilyourunoutofmoney?
A.months
B.months
C.months
D.months
E.months
Difficultylevel:Medium
Topic:ANNUITYDUETIMEPERIODSANDPRESENTVALUE
Type:PROBLEMS
58.TheBadGuysCo.isnotoriouslyknownasaslow-payer.Itcurrentlyneedstoborrow
$25,000andonlyonecompanywillevendealwithBadGuys.Thetermsoftheloancallfor
dailypaymentsof$.Thefirstpaymentisduetoday.Theinterestrateis21%compounded
daily.Whatisthetimeperiodofthisloan?
A.years
B.years
C.years
D.years
E.years
Difficultylevel:Medium
Topic:ANNUITYDUETIMEPERIODS
Type:PROBLEMS
59.TheRobertsonFirmisconsideringaprojectwhichcosts$123,900toundertake.The
projectwillyieldcashflowsof$4,monthlyfor30months.Whatistherateofreturnonthis
project?
A.%
B.%
C.%
D.%
E.%
Thiscannotbesolveddirectly,soit'seasiesttojustusethecalculatormethodtogetan
answer.Youcanthenusethecalculatoranswerastherateintheformulajusttoverifythat
youransweriscorrect.
Difficultylevel:Medium
Topic:ORDINARYANNUITYINTERESTRATE
Type:PROBLEMS
60.Yourinsuranceagentistryingtosellyouanannuitythatcosts$100,000today.Bybuying
thisannuity,youragentpromisesthatyouwillreceivepaymentsof$amonthforthenext40
years.Whatistherateofreturnonthisinvestment?
A.%
B.%
C.%
D.%
E.%
Thiscannotbesolveddirectly,soit'seasiesttojustusethecalculatormethodtogetan
answer.Youcanthenusethecalculatoranswerastherateintheformulajusttoverifythat
youansweriscorrect.
Difficultylevel:Medium
Topic:ORDINARYANNUITYINTERESTRATE
Type:PROBLEMS
61.Youhavebeeninvesting$120amonthforthelast15years.Today,yourinvestment
accountisworth$47,.Whatisyouraveragerateofreturnonyourinvestments?
A.%
B.%
C.%
D.%
E.%
Thiscannotbesolveddirectly,soit'seasiesttojustusethecalculatormethodtogetan
answer.Youcanthenusethecalculatoranswerastherateintheformulajusttoverifythat
youansweriscorrect.
Difficultylevel:Medium
Topic:ORDINARYANNUITYINTERESTRATE
Type:PROBLEMS
62.Brinker,Inc.hasbeeninvesting$136,000ayearforthepast4yearsintoabusiness
venture.Today,Brinkersoldthatventurefor$685,000.Whatisitsrateofreturnonthis
venture?
A.%
B.%
C.%
D.%
E.%
Thiscannotbesolveddirectly,soit'seasiesttojustusethecalculatormethodtogetan
answer.Youcanthenusethecalculatoranswerastherateintheformulajusttoverifythat
youansweriscorrect.
Difficultylevel:Easy
Topic:ORDINARYANNUITYINTERESTRATE
Type:PROBLEMS
63.Yourmotherhelpedyoustartsaving$25amonthbeginningonyour10thbirthday.She
alwaysmadeyoumakeyourdepositonthefirstdayofeachmonthjustto"startthemonthout
right."Today,youturn21andhave$4,inyoura
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