finance data bank
115. Downtown Bank is offering 3.4 percent compounded
daily on its savings accounts. You deposit $8,000 today. How much will you have
in your account 11 years from now?
A. $11,628.09
B. $11,714.06
C. $12,204.50
D. $12,336.81
E. $12,414.14
116. You want to buy a new sports coupe for $41,750,
and the finance office at the dealership has quoted you an 8.6 percent APR loan
compounded monthly for 48 months to buy the car. What is the effective interest
rate on this loan?
A. 8.28 percent
B. 8.41 percent
C. 8.72 percent
D. 8.87 percent
E. 8.95 percent
117. Beginning three months from now, you want to be
able to withdraw $1,500 each quarter from your bank account to cover college
expenses over the next 4 years. The account pays 1.25 percent interest per
quarter. How much do you need to have in your account today to meet your
expense needs over the next 4 years?
A. $21,630.44
B. $21,847.15
C. $22,068.00
D. $22,454.09
E. $22,711.18
118. You are planning to save for retirement over the
next 15 years. To do this, you will invest $1,100 a month in a stock account
and $500 a month in a bond account. The return on the stock account is expected
to be 7 percent, and the bond account will pay 4 percent. When you retire, you
will combine your money into an account with a 5 percent return. How much can
you withdraw each month during retirement assuming a 20year withdrawal
period?
A. $2,636.19
B. $2,904.11
C. $3,008.21
D. $3,113.04
E. $3,406.97
119. You want to be a millionaire when you retire in
40 years. You can earn an 11 percent annual return. How much more will you have
to save each month if you wait 10 years to start saving versus if you start
saving at the end of this month?
A. $79.22
B. $114.13
C. $168.47
D. $201.15
E. $240.29
120. You have just won the lottery and will receive $540,000
as your first payment one year from now. You will receive payments for 26
years. The payments will increase in value by 4 percent each year. The
appropriate discount rate is 10 percent. What is the present value of your
winnings?
A. $6,221,407
B. $6,906,372
C. $7,559,613
D. $7,811,406
E. $8,003.11
121. You are preparing to make monthly payments of
$65, beginning at the end of this month, into an account that pays 6 percent
interest compounded monthly. How many payments will you have made when your
account balance reaches $9,278?
A. 97
B. 108
C. 119
D. 124
E. 131
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122. You want to borrow $47,170 from your local bank
to buy a new sailboat. You can afford to make monthly payments of $1,160, but
no more. Assume monthly compounding. What is the highest rate you can afford on
a 48month APR loan?
A. 8.38 percent
B. 8.67 percent
C. 8.82 percent
D. 9.01 percent
E. 9.18 percent
123. You need a 25year, fixedrate mortgage to buy a
new home for $240,000. Your mortgage bank will lend you the money at a 7.5
percent APR for this 300month loan, with interest compounded monthly. However,
you can only afford monthly payments of $850, so you offer to pay off any
remaining loan balance at the end of the loan in the form of a single balloon
payment. What will be the amount of the balloon payment if you are to keep your
monthly payments at $850?
A. $738,464
B. $745,316
C. $767,480
D. $810,220
E. $847,315
124. The present value of the following cash flow
stream is $5,933.86 when discounted at 11 percent annually. What is the value
of the missing cash flow?
A. $1,500
B. $1,750
C. $2,000
D. $2,250
E. $2,500
125. You have just purchased a new warehouse. To finance the purchase, you've arranged for a 30year mortgage loan for 80 percent of the $2,600,000 purchase price. The monthly
to sell an asset 3 years from now for $90,000. The asset
costs $71,000 to produce today. At what rate will the firm just break even on
this contract?
A. 7.87 percent
B. 8.01 percent
C. 8.23 percent
D. 8.57 percent
E. 8.90 percent
payment on this loan will be $11,000. What is the effective
annual rate on this loan?
A. 4.98 percent
B. 5.25 percent
C. 5.46 percent
D. 6.01 percent
E. 6.50 percent
126. Consider a firm with a contract
127. What is the present value of $1,100 per year, at a discount rate of
10 percent if the first payment is received 6 years from now and the last
payment is received 28 years from now?
A. $6,067.36
B. $6,138.87
C. $6,333.33
D. $6,420.12
E. $6,511.08
128. You have your choice of two investment accounts.
Investment A is a 5year annuity that features endofmonth $2,500 payments and
has an interest rate of 11.5 percent compounded monthly. Investment B is a 10.5
percent continuously compounded lump sum investment, also good for five years.
How much would you need to invest in B today for it to be worth as much as
investment A five years from now?
A. $108,206.67
B. $119,176.06
C. $124,318.08
D. $129,407.17
E. $131,008.15
B. $1,053.87
C. $1,058.01
D. $1,063.30
E. $1,072.11
129. Given an interest rate of 8 percent per year,
what is the value at date t = 9 of a perpetual stream of $500 annual payments
that begins at date t = 17?
A. $3,646.81
B. $4,109.19
C. $4,307.78
D. $6,250.00
E. $6,487.17
130. You want to buy a new sports car for $55,000. The
contract is in the form of a 60month annuity due at a 6 percent APR,
compounded monthly. What will your monthly payment be?
A. $1,047.90
131. You are looking at a oneyear loan of $10,000. The interest rate is
quoted as 10 percent plus 5 points. A point on a loan is simply 1 percent (one
percentage point) of the loan amount. Quotes similar to this one are very
common with home mortgages. The interest rate quotation in this example
requires the borrower to pay 5 points to the lender up front and repay the loan
later with 10 percent interest. What is the actual rate you are paying on this
loan?
A. 15.00 percent
B. 15.47 percent
C. 15.55 percent
D. 15.79 percent
E. 15.84 percent
132. Your holiday ski vacation was great, but it
unfortunately ran a bit over budget. All is not lost. You just received an
offer in the mail to transfer your $5,000 balance from your current credit
card, which charges an annual rate of 18.7 percent, to a new credit card
charging a rate of 9.4 percent. You plan to make payments of $510 a month on
this debt. How many less payments will you have to make to pay off this debt if
you transfer the balance to the new card?
A. 0.36 payments
B. 0.48 payments
C. 1.10 payments
D. 1.23 payments
E. 2.49 payments
57. Miller Brothers Hardware paid an annual dividend
of $1.15 per share last month. Today, the company announced that future
dividends will be increasing by 2.6 percent annually. If you require a 12
percent rate of return, how much are you willing to pay to purchase one share
of this stock today?
A. $12.23
B. $12.55
C. $12.67
D. $12.72
E. $12.88
58. Sessler Manufacturers made two announcements
concerning its common stock today. First, the company announced that the next
annual dividend will be $1.75 a share. Secondly, all dividends after that will
decrease by 1.5 percent annually. What is the maximum amount you should pay to
purchase a share of this stock today if you require a 14 percent rate of
return?
A. $11.29
B. $12.64
C. $13.27
D. $14.00
E. $14.21
59. How much are you willing to pay for one share of
Jumbo Trout stock if the company just paid a $0.70 annual dividend, the
dividends increase by 1.6 percent annually, and you require a 10 percent rate
of return?
A. $8.29
B. $8.33
C. $8.47
D. $8.53
E. $8.59
60. Free Motion Enterprises paid a $2.20 per share
annual dividend last week. Dividends are expected to increase by 3.75 percent
annually. What is one share of this stock worth to you today if your required
rate of return is 15 percent?
A. $19.06
B. $19.30
C. $19.56
D. $20.29
E. $20.59
61. Upper Crust Bakers just paid an annual dividend of $2.80 a share and is expected to increase that amount by 4 percent per year. If you are planning to buy 1,000 shares of this
B. $14.01
C. $14.56
D. $14.79
E. $15.23
stock next year, how much should you expect to pay per
share if the market rate of return for this type of security is 11.50 percent
at the time of your purchase?
A. $37.33
B. $38.16
C. $38.83
D. $40.38
E. $42.00
62. The common stock of Textile Mills pays an annual dividend of $1.65 a share. The company has promised to maintain a constant dividend even though economic times are tough. How much are you willing to pay for one share of this stock if you want to earn a 12 percent annual return?
A. $13.75

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