general business data bank

Multiple Choice Questions

56. Assume the total cost of a college education will be $300,000 when your child enters college in 16 years. You presently have $75,561 to invest. What rate of interest must you earn on your investment to cover the cost of your child's college education?

A. 7.75 percent

B. 8.50 percent

C. 9.00 percent

D. 9.25 percent

E. 9.50 percent

57. At 11 percent interest, how long would it take to quadruple your money?

A. 6.55 years

B. 6.64 years

C. 13.09 years

D. 13.28 years

E. 13.56 years

58. Assume the average vehicle selling price in the United States last year was $41,996. The average price 9 years earlier was $29,000. What was the annual increase in the selling price over this time period?

A. 3.89 percent

B. 4.20 percent

C. 4.56 percent

D. 5.01 percent

E. 5.40 percent

59. You're trying to save to buy a new $160,000 Ferrari. You have $56,000 today that can be invested at your bank. The bank pays 6 percent annual interest on its accounts. How many years will it be before you have enough to buy the car? Assume the price of the car remains constant.

A. 16.67 years

B. 17.04 years

C. 17.41 years

D. 17.87 years

E. 18.02 years

60. Imprudential, Inc. has an unfunded pension liability of $850 million that must be paid in 25 years. To assess the value of the firm's stock, financial analysts want to discount this liability back to the present. The relevant discount rate is 6.5 percent. What is the present value of this liability?

A. $159,803,162

B. $171,438,907

C. $176,067,311

D. $184,519,484

E. $191,511,367

61. You have just received notification that you have won the $1.4 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday, 70 years from now. The appropriate discount rate is 8 percent. What is the present value of your winnings?

A. $4,288.16

B. $6,404.20

C. $15,309.91

D. $23,333.33

E. $25,000.00

62. Your coin collection contains fifty-four 1941 silver dollars. Your grandparents purchased them for their face value when they were new. These coins have appreciated at a 10 percent annual rate. How much will your collection be worth when you retire in 2060?

A. $3,611,008

B. $3,987,456

C. $4,122,394

D. $4,421,008

E. $4,551,172

63. In 1895, the winner of a competition was paid $110. In 2006, the winner's prize was $70,000. What will the winner's prize be in 2040 if the prize continues increasing at the same rate?

A. $389,400

B. $421,122

C. $479,311

D. $505,697

E. $548,121

64. Suppose that the first comic book of a classic series was sold in 1954. In 2000, the estimated price for this comic book in good condition was about $340,000. This represented a return of 27 percent per year. For this to be true, what was the original price of the comic book in 1954?

A. $5.00

B. $5.28

C. $5.50

D. $5.71

E. $6.00

65. Suppose you are committed to owning a $140,000 Ferrari. You believe your mutual fund can achieve an annual rate of return of 9 percent and you want to buy the car in 7 years. How much must you invest today to fund this purchase assuming the price of the car remains constant?

A. $74,208.16

B. $76,584.79

C. $77,911.08

D. $78,019.82

E. $79,446.60

66. You have just made a $1,500 contribution to your individual retirement account. Assume you earn a 12 percent rate of return and make no additional contributions. How much more will your account be worth when you retire in 25 years than it would be if you waited another 10 years before making this contribution?

A. $8,306.16

B. $9,658.77

C. $16,311.18

D. $16,907.17

E. $17,289.75

67. You are scheduled to receive $30,000 in two years. When you receive it, you will invest it for 5 more years, at 8 percent per year. How much money will you have 7 years from now?

A. $39,909.19

B. $41,381.16

C. $44,079.84

D. $47,209.19

E. $51,414.73

68. You expect to receive $9,000 at graduation in 2 years. You plan on investing this money at 10 percent until you have $60,000. How many years will it be until this occurs?

A. 18.78 years

B. 19.96 years

C. 21.90 years

D. 23.08 years

E. 25.00 years