finance data bank

32. You buy an annuity that will pay you $24,000 a year for 25 years. The payments are paid on the first day of each year. What is the value of this annuity today if the discount rate is 8.5 percent?
A. $241,309
B. $245,621
C. $251,409
D. $258,319
E. $266,498

33. You are scheduled to receive annual payments of $4,800 for each of the next 7 years. The discount rate is 8 percent. What is the difference in the present value if you receive these payments at the beginning of each year rather than at the end of each year?
A. $1,999
B. $2,013
C. $2,221
D. $2,227
E. $2,304

34. You are comparing two annuities with equal present values. The applicable discount rate is 8.75 percent. One annuity pays $5,000 on the first day of each year for 20 years. How much does the second annuity pay each year for 20 years if it pays at the end of each year?
A. $5,211
B. $5,267
C. $5,309
D. $5,390
E. $5,438

35. Trish receives $480 on the first of each month. Josh receives $480 on the last day of each month. Both Trish and Josh will receive payments for next three years. At a 9.5 percent discount rate, what is the difference in the present value of these two sets of payments?
A. $118.63
B. $121.06
C. $124.30
D. $129.08
E. $132.50

36. What is the future value of $1,200 a year for 40 years at 8 percent interest? Assume annual compounding.
A. $301,115
B. $306,492
C. $310,868
D. $342,908
E. $347,267

37. What is the future value of $15,000 a year for 30 years at 12 percent interest?
A. $2,878,406
B. $3,619,990
C. $3,711,414
D. $3,989,476
E. $4,021,223

38. Alexa plans on saving $3,000 a year and expects to earn an annual rate of 10.25 percent. How much will she have in her account at the end of 45 years?
A. $1,806,429
B. $1,838,369
C. $2,211,407
D. $2,333,572
E. $2,508,316

39. Theresa adds $1,000 to her savings account on the first day of each year. Marcus adds $1,000 to his savings account on the last day of each year. They both earn 6.5 percent annual interest. What is the difference in their savings account balances at the end of 35 years?
A. $8,062
B. $8,113
C. $8,127
D. $8,211
E. $8,219

40. You are borrowing $17,800 to buy a car. The terms of the loan call for monthly payments for 5 years at 8.6 percent interest. What is the amount of each payment?
A. $287.71
B. $291.40
C. $301.12
D. $342.76
E. $366.05

41. You borrow $165,000 to buy a house. The mortgage rate is 7.5 percent and the loan period is 30 years. Payments are made monthly. If you pay the mortgage according to the loan agreement, how much total interest will you pay?
A. $206,408
B. $229,079
C. $250,332
D. $264,319
E. $291,406

42. Holiday Tours (HT) has an employment contract with its newly hired CEO. The contract requires a lump sum payment of $10.4 million be paid to the CEO upon the successful completion of her first three years of service. HT wants to set aside an equal amount of money at the end of each year to cover this anticipated cash outflow and will earn 5.65 percent on the funds. How much must HT set aside each year for this purpose?
A. $3,184,467
B. $3,277,973
C. $3,006,409
D. $3,318,190
E. $3,466,667

43. Nadine is retiring at age 62 and expects to live to age 85. On the day she retires, she has $348,219 in her retirement savings account. She is somewhat conservative with her money and expects to earn 6 percent during her retirement years. How much can she withdraw from her retirement savings each month if she plans to spend her last penny on the morning of her death?
A. $1,609.92
B. $1,847.78
C. $1,919.46
D. $2,116.08
E. $2,329.05

44. Kingston Development Corp. purchased a piece of property for $2.79 million. The firm paid a down payment of 15 percent in cash and financed the balance. The loan terms require monthly payments for 15 years at an annual percentage rate of 7.75 percent, compounded monthly. What is the amount of each mortgage payment?
A. $22,322.35
B. $23,419.97
C. $23,607.11
D. $24,878.15
E. $25,301.16

Amount financed = $2,790,000´ (1 - 0.15) = $2,371,500

45. You estimate that you will owe $42,800 in student loans by the time you graduate. The interest rate is 4.25 percent. If you want to have this debt paid in full within six years, how much must you pay each month?
A. $611.09
B. $674.50
C. $714.28
D. $736.05
E. $742.50

46. You are buying a previously owned car today at a price of $3,500. You are paying $300 down in cash and financing the balance for 36 months at 8.5 percent. What is the amount of each loan payment?
A. $101.02
B. $112.23
C. $118.47
D. $121.60
E. $124.40

Amount financed = $3,500 - $300 = $3,200

47. Atlas Insurance wants to sell you an annuity which will pay you $3,400 per quarter for 25 years. You want to earn a minimum rate of return of 6.5 percent. What is the most you are willing to pay as a lump sum today to buy this annuity?
A. $151,008.24
B. $154,208.16
C. $167,489.11
D. $173,008.80
E. $178,927.59

48. Your car dealer is willing to lease you a new car for $245 a month for 48 months. Payments are due on the first day of each month starting with the day you sign the lease contract. If your cost of money is 6.5 percent, what is the current value of the lease?
A. $10,331.03
B. $10,386.99
C. $12,197.74
D. $12,203.14
E. $13,008.31

49. Your great aunt left you an inheritance in the form of a trust. The trust agreement states that you are to receive $3,600 on the first day of each year, starting immediately and continuing for 20 years. What is the value of this inheritance today if the applicable discount rate is 6.75 percent?
A. $38,890.88
B. $40,311.16
C. $41,516.01
D. $42,909.29
E. $43,333.33

50. You just received an insurance settlement offer related to an accident you had six years ago. The offer gives you a choice of one of the following three offers:



You can earn 7.5 percent on your investments. You do not care if you personally receive the funds or if they are paid to your heirs should you die within the settlement period. Which one of the following statements is correct given this information?
A. Option A is the best choice as it provides the largest monthly payment.
B. Option B is the best choice because it pays the largest total amount.
C. Option C is the best choice because it is has the largest current value.
D. Option B is the best choice because you will receive the most payments.
E. You are indifferent to the three options as they are all equal in value.

51. Samuelson Engines wants to save $750,000 to buy some new equipment six years from now. The plan is to set aside an equal amount of money on the first day of each quarter starting today. The firm can earn 4.75 percent on its savings. How much does the firm have to save each quarter to achieve its goal?
A. $26,872.94
B. $26,969.70
C. $27,192.05
D. $27,419.29
E. $27,911.08

52. Stephanie is going to contribute $300 on the first of each month, starting today, to her retirement account. Her employer will provide a 50 percent match. In other words, her employer will contribute 50 percent of the amount Stephanie saves. If both Stephanie and her employer continue to do this and she can earn a monthly rate of 0.90 percent, how much will she have in her retirement account 35 years from now?
A. $1,936,264
B. $1,943,286
C. $1,989,312
D. $2,068,418
E. $2,123,007

53. You are considering an annuity which costs $160,000 today. The annuity pays $18,126 a year at an annual interest rate of 7.50 percent. What is the length of the annuity time period?
A. 12 years
B. 13 years
C. 14 years
D. 15 years
E. 16 years

54. Today, you borrowed $6,200 on your credit card to purchase some furniture. The interest rate is 14.9 percent, compounded monthly. How long will it take you to pay off this debt assuming that you do not charge anything else and make regular monthly payments of $120?
A. 5.87 years
B. 6.40 years
C. 6.93 years
D. 7.23 years
E. 7.31 years

55. Meadow Brook Manor would like to buy some additional land and build a new assisted living center. The anticipated total cost is $23.6 million. The CEO of the firm is quite conservative and will only do this when the company has sufficient funds to pay cash for the entire construction project. Management has decided to save $1.2 million a quarter for this purpose. The firm earns 6.25 percent, compounded quarterly, on the funds it saves. How long does the company have to wait before expanding its operations?
A. 4.09 years
B. 4.32 years
C. 4.46 years
D. 4.82 years
E. 4.91 years

56. Today, you are retiring. You have a total of $411,016 in your retirement savings and have the funds invested such that you expect to earn an average of 7.10 percent, compounded monthly, on this money throughout your retirement years. You want to withdraw $2,500 at the beginning of every month, starting today. How long will it be until you run out of money?
A. 31.97 years
B. 34.56 years
C. 42.03 year
D. 48.19 years
E. You will never run out of money.

57. Gene's Art Gallery is notoriously known as a slow-payer. The firm currently needs to borrow $27,500 and only one company will even deal with them. The terms of the loan call for daily payments of $100. The first payment is due today. The interest rate is 21.9 percent, compounded daily. What is the time period of this loan? Assume a 365 day year.
A. 264.36 days
B. 280.81 days
C. 300.43 days
D. 316.46 days
E. 341.09 days