Question 1

You wish to buy a $15,000 car. The dealer offers you a 4-year loan with a 9 percent APR. What are the monthly payments?

Accepted Answer

A) $260.78 
B) $312.50 
C) $373.28 
D) $3,820.56 
A) $260.78 
B) $312.50 
C) $373.28 
D) $3,820.56

Question 2

A small business owner visits his bank to ask for a loan. The owner states that she can repay a loan at $1,250 per month for the next three years and then $500 per month for two years after that. If the bank is charging customers 12 percent APR, how much would it be willing to lend the business owner?

Accepted Answer

A) $45,058.15 
B) $45,911.64 
C) $46,055.21 
D) $46,813.94 
A) $45,058.15 
B) $45,911.64 
C) $46,055.21 
D) $46,813.94

Question 3

Assume that you contribute $200 per month to a retirement plan for 15 years. Then you are able to increase the contribution to $400 per month for another 25 years. Given a 5 percent interest rate, what is the value of your retirement plan after 40 years?

Accepted Answer

A) $424,305.97 
B) $24,159.95 
C) $28,475.66 
D) $72,479.86 
A) $424,305.97 
B) $24,159.95 
C) $28,475.66 
D) $72,479.86

Question 4

As a college student, you probably receive many credit card offers in the mail. Consider these two offers. The first card charges a 17 percent APR. An examination of the footnotes reveals that this card compounds daily (365 day year). The second credit card charges 18 percent APR and compounds semiannually. What is the effective annual rate of the cheaper card?

Accepted Answer

A) 18.00 percent 
B) 17.00 percent 
C) 18.81 percent 
D) 18.53 percent 
A) 18.00 percent 
B) 17.00 percent 
C) 18.81 percent 
D) 18.53 percent

Question 5

A furniture company is offering a choice of deals. You can receive $100 cash back on the purchase, or a 2 percent APR, 2-year loan. The price of the dining room set is $3,750 and you could obtain a 2-year loan from your credit union at 6 percent APR. What is the cost per month of each deal?

Accepted Answer

A) Cash back: $161.77, 2 percent APR: $159.53 
B) Cash back: $171.29, 2 percent APR: $179.02 
C) Cash back: $153.96, 2 percent APR: $181.09 
D) Cash back: $180.03, 2 percent APR: $166.17 
A) Cash back: $161.77, 2 percent APR: $159.53 
B) Cash back: $171.29, 2 percent APR: $179.02 
C) Cash back: $153.96, 2 percent APR: $181.09 
D) Cash back: $180.03, 2 percent APR: $166.17

Question 6

Jane has been saving $200 in her retirement account each month for the last 20 years and plans to continue contributing $200 each month for the next 20 years. Her account has been earning an 8 percent annual interest rate and she expects to earn the same rate for the next 20 years. Her twin brother, Hal, has not saved anything for the last 20 years. Due to sibling rivalry, he wants to have as much as Jane is expected to have at the end of 20 years. If Hal expects to earn the same annual interest rate as Jane, how much must Hal save each month to achieve his goal?

Accepted Answer

A) $400.00 
B) $1,185.36 
C) $1,569.85 
D) $2,909.17 
A) $400.00 
B) $1,185.36 
C) $1,569.85 
D) $2,909.17

Question 7

When you get your credit card bill, it will offer a minimum payment, which

Accepted Answer

A) usually only pays the accrued interest and a small amount of principal. 
B) usually only pays the principal and a small amount of accrued interest. 
C) usually only pays the principal and no accrued interest. 
D) usually only pays the accrued interest and no principal. 
A) usually only pays the accrued interest and a small amount of principal. 
B) usually only pays the principal and a small amount of accrued interest. 
C) usually only pays the principal and no accrued interest. 
D) usually only pays the accrued interest and no principal.

Question 8

Given a 7 percent interest rate, compute the year 8 future value of deposits made in years 1, 2, 3, and 4 of $750, $1,200, $500, and $250.

Accepted Answer

A) $3,801.62 
B) $3,899.17 
C) $4,034.20 
D) $4,167.29 
A) $3,801.62 
B) $3,899.17 
C) $4,034.20 
D) $4,167.29

Question 9

A furniture company is offering a choice of deals. You can receive $500 cash back on the purchase, or a 3 percent APR, 2-year loan. The price of the dining room set is $5,000 and you could obtain a 2-year loan from your credit union at 4 percent APR. What is the cost per month of each deal?

Accepted Answer

A) cash back: $193.42, 4 percent APR: $217.12 
B) cash back: $193.42, 2 percent APR: $214.91 
C) cash back: $195.41, 2 percent APR: $217.12 
D) cash back: $195.41, 2 percent APR: $214.91 
A) cash back: $193.42, 4 percent APR: $217.12 
B) cash back: $193.42, 2 percent APR: $214.91 
C) cash back: $195.41, 2 percent APR: $217.12 
D) cash back: $195.41, 2 percent APR: $214.91

Question 10

A local furniture store is advertising a deal in which you buy a $3,500 living room set with three years before you need to make payments (no interest is incurred). How much would you have to deposit each month in a savings account earning 3.5 percent APR, compounded monthly, to be able to pay the $3,500 bill in three years?

Accepted Answer

A) $92.35 
B) $108.13 
C) $112.86 
D) $121.97 
A) $92.35 
B) $108.13 
C) $112.86 
D) $121.97

Question 11

Joey realizes that he has charged too much on his credit card and has racked up $3,000 in debt. If he can pay $150 each month and the card charges 18 percent APR (compounded monthly), how long will it take him to pay off the debt?

Accepted Answer

A) 13.03 months 
B) 14.68 months 
C) 20.00 months 
D) 23.96 months 
A) 13.03 months 
B) 14.68 months 
C) 20.00 months 
D) 23.96 months

Question 12

What annual interest rate would you need to earn if you wanted a $1,250 per month contribution to grow to $65,000 in three years?

Accepted Answer

A) 18.59 percent 
B) 21.26 percent 
C) 24.00 percent 
D) 25.19 percent 
A) 18.59 percent 
B) 21.26 percent 
C) 24.00 percent 
D) 25.19 percent

Question 13

Consider that you are 30 years old and have just changed to a new job. You have $91,000 in the retirement plan from your former employer. You can roll that money into the retirement plan of the new employer. You will also contribute $400 each month into your new employer's plan. If the rolled-over money and the new contributions both earn a 7 percent annual return, how much should you expect to have when you retire in 38 years?

Accepted Answer

A) $2,019,095.26 
B) $2,195,145.40 
C) $2,298,025.12 
D) $2,301,116.92 
A) $2,019,095.26 
B) $2,195,145.40 
C) $2,298,025.12 
D) $2,301,116.92

Question 14

A perpetuity, a special form of annuity, pays cash flows

Accepted Answer

A) and is not effected by interest rate changes. 
B) that do not have time value of money implications. 
C) continuously for one year. 
D) periodically forever. 
A) and is not effected by interest rate changes. 
B) that do not have time value of money implications. 
C) continuously for one year. 
D) periodically forever.

Question 15

Your client has been given a trust fund valued at $1 million. She cannot access the money until she turns 68 years old, which is in 12 years. At that time, she can withdraw $30,000 per month. If the trust fund is invested at a 7 percent interest rate, how many months will it last your client once she starts to withdraw the money?

Accepted Answer

A) 77.05 months 
B) 81.05 months 
C) 99.05 months 
D) 119.05 months 
A) 77.05 months 
B) 81.05 months 
C) 99.05 months 
D) 119.05 months

Question 16

A loan is offered with monthly payments and a 14.5 percent APR. What is the loan's effective annual rate (EAR)?

Accepted Answer

A) 14.97 percent 
B) 15.50 percent 
C) 15.13 percent 
D) 15.63 percent 
A) 14.97 percent 
B) 15.50 percent 
C) 15.13 percent 
D) 15.63 percent

Question 17

When saving for future expenditures, we can add the ________ of contributions over time to see what the total will be worth at some point in time.

Accepted Answer

A) present value 
B) future value 
C) time value to money 
D) payment 
A) present value 
B) future value 
C) time value to money 
D) payment

Question 18

Payday loans are very short-term loans that charge very high interest rates. You can borrow $200 today and repay $250 in two weeks. What is the compound annual rate implied by this 25 percent rate charged for only two weeks?

Accepted Answer

A) 26.60 percent 
B) 32,987.22 percent 
C) 30.00 percent 
D) 128.25 percent 
A) 26.60 percent 
B) 32,987.22 percent 
C) 30.00 percent 
D) 128.25 percent

Question 19

Payday loans are very short-term loans that charge very high interest rates. You can borrow $500 today and repay $550 in ten weeks. What is the compound annual rate implied by this 10 percent rate charged for only ten weeks?

Accepted Answer

A) 5.20 percent 
B) 10.41 percent 
C) 59.94 percent 
D) 64.15 percent 
A) 5.20 percent 
B) 10.41 percent 
C) 59.94 percent 
D) 64.15 percent

Question 20

Compute the present value of a $2,500 deposit in year 4 and another $10,000 deposit at the end of year 8 if interest rates are 15 percent.

Accepted Answer

A) $4,211.26 
B) $4,572.19 
C) $4,698.40 
D) $4,901.57 
A) $4,211.26 
B) $4,572.19 
C) $4,698.40 
D) $4,901.57

You wish to buy a $15,000 car. The dealer offers you a 4-year loan with a 9 percent APR. What are the monthly payments?

Assume that you contribute $200 per month to a retirement plan for 15 years. Then you are able to increase the contribution to $400 per month for another 25 years. Given a 5 percent interest rate, what is the value of your retirement plan after 40 years?

A furniture company is offering a choice of deals. You can receive $100 cash back on the purchase, or a 2 percent APR, 2-year loan. The price of the dining room set is $3,750 and you could obtain a 2-year loan from your credit union at 6 percent APR. What is the cost per month of each deal?

When you get your credit card bill, it will offer a minimum payment, which

Given a 7 percent interest rate, compute the year 8 future value of deposits made in years 1, 2, 3, and 4 of $750, $1,200, $500, and $250.

A furniture company is offering a choice of deals. You can receive $500 cash back on the purchase, or a 3 percent APR, 2-year loan. The price of the dining room set is $5,000 and you could obtain a 2-year loan from your credit union at 4 percent APR. What is the cost per month of each deal?

Joey realizes that he has charged too much on his credit card and has racked up $3,000 in debt. If he can pay $150 each month and the card charges 18 percent APR (compounded monthly), how long will it take him to pay off the debt?

What annual interest rate would you need to earn if you wanted a $1,250 per month contribution to grow to $65,000 in three years?

A perpetuity, a special form of annuity, pays cash flows

A loan is offered with monthly payments and a 14.5 percent APR. What is the loan's effective annual rate (EAR)?

When saving for future expenditures, we can add the ________ of contributions over time to see what the total will be worth at some point in time.

Payday loans are very short-term loans that charge very high interest rates. You can borrow $200 today and repay $250 in two weeks. What is the compound annual rate implied by this 25 percent rate charged for only two weeks?

Payday loans are very short-term loans that charge very high interest rates. You can borrow $500 today and repay $550 in ten weeks. What is the compound annual rate implied by this 10 percent rate charged for only ten weeks?

Compute the present value of a $2,500 deposit in year 4 and another $10,000 deposit at the end of year 8 if interest rates are 15 percent.

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters

Exam 5: Time Value of Money 2: Analyzing Annuity Cash Flows

You wish to buy a $15,000 car. The dealer offers you a 4-year loan with a 9 percent APR. What are the monthly payments?

Assume that you contribute $200 per month to a retirement plan for 15 years. Then you are able to increase the contribution to $400 per month for another 25 years. Given a 5 percent interest rate, what is the value of your retirement plan after 40 years?

A furniture company is offering a choice of deals. You can receive $100 cash back on the purchase, or a 2 percent APR, 2-year loan. The price of the dining room set is $3,750 and you could obtain a 2-year loan from your credit union at 6 percent APR. What is the cost per month of each deal?

When you get your credit card bill, it will offer a minimum payment, which

Given a 7 percent interest rate, compute the year 8 future value of deposits made in years 1, 2, 3, and 4 of $750, $1,200, $500, and $250.

A furniture company is offering a choice of deals. You can receive $500 cash back on the purchase, or a 3 percent APR, 2-year loan. The price of the dining room set is $5,000 and you could obtain a 2-year loan from your credit union at 4 percent APR. What is the cost per month of each deal?

Joey realizes that he has charged too much on his credit card and has racked up $3,000 in debt. If he can pay $150 each month and the card charges 18 percent APR (compounded monthly), how long will it take him to pay off the debt?

What annual interest rate would you need to earn if you wanted a $1,250 per month contribution to grow to $65,000 in three years?

A perpetuity, a special form of annuity, pays cash flows

A loan is offered with monthly payments and a 14.5 percent APR. What is the loan's effective annual rate (EAR)?

When saving for future expenditures, we can add the ________ of contributions over time to see what the total will be worth at some point in time.

Payday loans are very short-term loans that charge very high interest rates. You can borrow $200 today and repay $250 in two weeks. What is the compound annual rate implied by this 25 percent rate charged for only two weeks?

Payday loans are very short-term loans that charge very high interest rates. You can borrow $500 today and repay $550 in ten weeks. What is the compound annual rate implied by this 10 percent rate charged for only ten weeks?

Compute the present value of a $2,500 deposit in year 4 and another $10,000 deposit at the end of year 8 if interest rates are 15 percent.

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters