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

If the future value of an ordinary,5-year annuity is $100,000 and interest rates are 5 percent,what is the future value of the same annuity due?

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

Payday loans are very short-term loans that charge very high interest rates.You can borrow $600 today and repay $675 in two weeks.What is the compound annual rate implied by this 12.5 percent rate charged for only two weeks?

You have reviewed your budget and determine that the most you can afford on a car loan is $375 per month.What is the most you can borrow if interest rates are 8 percent and you can pay the loan over five years?

If you start making $115 monthly contributions today and continue them for six years,what is their present value if the compounding rate is 12 percent APR? What is the present value of this annuity?

Which of the following will increase the present value of an annuity?

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?

Which of the following statements is correct?

A loan is offered with monthly payments and a 10 percent APR.What is the loan's effective annual rate (EAR)?

Jane has been saving $450 in her retirement account each month for the last 20 years and plans to continue contributing $450 each month for the next 20 years.Her account has been earning a 9 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?

A small business owner visits his bank to ask for a loan.The owner states that she can repay a loan at $1,500 per month for the next 3 years and then $500 per month for three years after that.If the bank is charging customers 10 percent APR,how much would it be willing to lend the business owner?

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?

If the present value of an ordinary,8-year annuity is $12,500 and interest rates are 9.1 percent,what is the present value of the same annuity due?

You win $1,000 today,which happens to be your 20th birthday.You decide to deposit this money in an account and plan to add $1,000 to it each year on your birthday beginning one year from today.If you earn 10 percent per year in the account,how long will it take to grow to $750,000?

The present value of annuity payments made far into the future is

Say that you purchase a house for $150,000 by getting a mortgage for $135,000 and paying a $15,000 down payment.If you get a 15-year mortgage with a 6 percent interest rate,what would the loan balance be in seven years?

A perpetuity pays $250 per year and interest rates are 5.5 percent.How much would its value change if interest increased to 8.5 percent? Did the value increase or decrease?

Your current $115,000 mortgage calls for monthly payments over 30 years at an annual interest rate of 7 percent.If you pay an additional $50 each month beginning with the first payment,how much interest expense do you save by prepaying?

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 small business owner visits his bank to ask for a loan.The owner states that he can repay a loan at $1,500 per month for the next three years and then $500 per month for the two years after that.If the bank is charging customers 5.5 percent APR,how much would it be willing to lend the business owner?