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41. Assume that you own an annuity that will pay you $15,000 per year for 12 years, with the first payment being made today. You need money today to start a new business, and your uncle offers to give you $120,000 for the annuity. If you sell it, what rate of return would your uncle earn on his investment?

a. 6.85%

b. 7.21%

c. 7.59%

d. 7.99%

e. 8.41%

42. What annual payment must you receive in order to earn a 6.5% rate of return on a perpetuity that has a cost of $1,250?

a. $77.19

b. $81.25

c. $85.31

d. $89.58

e. $94.06

43. What is the present value of the following cash flow stream at a rate of 6.25%?

Years: 0 1 2 3 4

| | | | |

CFs: $0 $75 $225 $0 $300

a. $411.57

b. $433.23

c. $456.03

d. $480.03

e. $505.30

44. What is the present value of the following cash flow stream at a rate of 12.0%?

Years: 0 1 2 3 4

| | | | |

CFs: $0 $1,500 $3,000 $4,500 $6,000

a. $9,699

b. $10,210

c. $10,747

d. $11,284

e. $11,849

.

45. What is the present value of the following cash flow stream at a rate of 8.0%?

Years: 0 1 2 3

| | | |

CFs: $750 $2,450 $3,175 $4,400

a. $7,917

b. $8,333

c. $8,772

d. $9,233

e. $9,695

46. You sold a car and accepted a note with the following cash flow stream as your payment. What was the effective price you received for the car assuming an interest rate of 6.0%?

Years: 0 1 2 3 4

| | | | |

CFs: $0 $1,000 $2,000 $2,000 $2,000

a. $5,987

b. $6,286

c. $6,600

d. $6,930

e. $7,277

I/

47. At a rate of 6.5%, what is the future value of the following cash flow stream?

Years: 0 1 2 3 4

| | | | |

CFs: $0 $75 $225 $0 $300

a. $526.01

b. $553.69

c. $582.83

d. $613.51

e. $645.80

48. Your father paid $10,000 (CF at t = 0) for an investment that promises to pay $750 at the end of each of the next 5 years, then an additional lump sum payment of $10,000 at the end of the 5th year. What is the expected rate of return on this investment?

a. 6.77%

b. 7.13%

c. 7.50%

d. 7.88%

e. 8.27%

49. You are offered a chance to buy an asset for $7,250 that is expected to produce cash flows of $750 at the end of Year 1, $1,000 at the end of Year 2, $850 at the end of Year 3, and $6,250 at the end of Year 4. What rate of return would you earn if you bought this asset?

a. 4.93%

b. 5.19%

c. 5.46%

d. 5.75%

e. 6.05%

50. What’s the future value of $1,500 after 5 years if the appropriate interest rate is 6%, compounded semiannually?

a. $1,819

b. $1,915

c. $2,016

d. $2,117

e. $2,223