Question 1

Gary has determined he wants an annuity paying $10,000 a year for 10 years,with the first payment payable on his 60th birthday.If j1 = 8%,what single deposit must he make on his 40th birthday to fund this annuity?

Accepted Answer

A)  $13,329.96
B)  $14,396.36
C)  $15,548.07
D)  $16,791.91 C

Question 2

A company has developed a unique way to allow their employees to accumulate $5000 in order to buy $5000 worth of shares in the company.The company will set up an account for each employee,paying interest at j12 = 12%.At the end of every month the company will deduct an amount from an employee's pay and deposit it into this account (first deduction made 1 month from now).The company has decided to deduct n-payments of $81.25,plus make a smaller concluding deduction one month after the final deduction of $81.25,at which time the employee will have $5000.What is the size of this smaller concluding deduction?

Accepted Answer

A)  $24.08
B)  $25.66
C)  $25.92
D)  No final deduction is needed D

Question 3

Sally deposits $10,200 today in a fund earning interest at j2 = 6%.She wishes to withdraw $600 every 6 months for as long as possible,with the first withdrawal made today.Including the withdrawal made today,how many full withdrawals of $600 would she be able to make?

Accepted Answer

A)  22
B)  23
C)  24
D)  25 B

Question 4

Sally can buy some furniture for $11,000 cash or monthly payments of $1000 for 1 year,with the first $1000 payment made today.What range contains the interest rate j12 that Sally is being charged?

Accepted Answer

A)  18% 12 
B)  19% 12 
C)  20% 12 
D)  21% 12 < 22%

Question 5

Jerry makes semi-annual deposits of $R into a fund paying j2 = 5%.His first deposit was made on March 15,2011.His last deposit will be made on March 15,2015.On September 15,2015 he has accumulated $15,000 in the fund.What is R?

Accepted Answer

A)  $1470.10
B)  $1506.85
C)  $1675.13
D)  $1717.01

Question 6

Betty,who just turned 17 today,receives an inheritance of $A.She will receive $5000 every 6 months for 10 years,starting the day she turns 25.If j2 = 8%,what is A?

Accepted Answer

A)  $67,951.50
B)  $37,731.06
C)  $36,712.08
D)  $36,279.86

Question 7

Bank A offers you a loan which you will repay over 5-years at j12 = 6% with monthly payments of $1500.Bank B offers you the same loan amount,but at j4 = 6%,which you will repay over 5-years with quarterly payments of $R.What is the maximum value of R for you to even consider Bank B?

Accepted Answer

A)  $4525.88
B)  $4522.54
C)  $4519.19
D)  $4500.00

Question 8

Deposits of $2000 are made every 6-months for 6-years in a fund that pays interest at j2 = 8%.Just after the 12th deposit,the interest rate changes to j4 = 8% and quarterly deposits of $1000 are now made,first deposit 3 months after the interest rate change.How much is in the fund immediately after the 20th deposit of $1000?

Accepted Answer

A)  $54,348.98
B)  $68,495.94
C)  $68,781.09
D)  $68,952.48

Question 9

An individual buys $15,000 worth of furniture.They make a down payment of $5000 and pay off the rest of their bill with quarterly payments of $R for 10 years.If j4 = 8% and the first quarterly payment is made 3 months after the loan is advanced,what is R?

Accepted Answer

A)  $543.34
B)  $365.56
C)  $358.39
D)  $338.75

Question 10

An investor wants to accumulate $10,000 at the end of 15 years by making 11 annual deposits of $R,1st deposit to be made at the end of year 4.If j1 = 7%,what is R?

Accepted Answer

A)  $559.01
B)  $592.12
C)  $614.93
D)  $663.57

Question 11

Mrs.Smith makes 20 annual deposits of $2000 into a retirement savings account,first deposit made today.If she earns j1 = 5% on her money,how much does she have 25 years from today?

Accepted Answer

A)  $66,131.91
B)  $84,402.94
C)  $88,623.08
D)  $95,454.20

Question 12

A deposit of $10,000 is made today.Semi-annual withdrawals of $R are made for 15-years,first withdrawal made 6-months from today.The fund earns interest at j2 = 10% for the first 6-years and j2 = 6% thereafter.What is R?

Accepted Answer

A)  $618.93
B)  $605.26
C)  $540.26
D)  $442.15

Question 13

A company wishes to accumulate $100,000.To do so,they will make quarterly deposits of $4000 into a fund paying interest at j4 = 8%.It turns out they need to make 20 deposits,plus a smaller drop payment.What is the size of the drop payment needed?

Accepted Answer

A)  $2866.73
B)  $0
C)  $2810.52
D)  $866.73

Question 14

You plan to make 40-quarterly deposits into a fund in order to have $10,000 at the end of 10 years.Consider the following 3 cases:
a. Deposit $RI starting today;earn j4 = x%
b. Deposit $RII starting 3-months from today;earn j4 = x%
c. Deposit $RIII starting 3-months from today;earn j12 = x%
Which of the following is true?

Accepted Answer

A)  RI > RII ;RII III
B)  RI > RII ;RII > RIII
C)  RI II ;RII II
D)  RI II ;RII > RIII

Question 15

You make quarterly deposits of $500.The first 12 deposits earn j4 = 6%.Immediately after the 12th deposit,the interest rate changes to j4 = 4%.How much have you accumulated immediately after the 20th deposit?

Accepted Answer

A)  $11,561.83
B)  $11,488.25
C)  $11,203.72
D)  $10,663.44

Question 16

You deposit $100 every three months for the next 50 years,first deposit made today.If the interest rate is j4 = 10%,how much do you have three months after your last deposit?

Accepted Answer

A)  $582,417
B)  $568,212
C)  $568,112
D)  $554,256

Question 17

A payment of $25,000 is due on January 1,2014.To accumulate enough money to make this required payment,monthly deposits of $R were made into an account earning j12 = 6% starting on June 1,2012.If the last deposit is made on January 1,2014,what is R?

Accepted Answer

A)  $1257.56
B)  $1191.66
C)  $1251.30
D)  $1185.73

Question 18

Trish needs to have $20,000 one year from now.She plans to make 9 equal monthly deposits,first deposit made today.What is the size of each deposit needed if the money is deposited into an account paying j12 = 6%?

Accepted Answer

A)  $2135.12
B)  $2145.80
C)  $2156.53
D)  $2178.15

Question 19

To buy some furniture,you can put $150 down and "don't pay a cent" for 6 months.At the end of 6 months,you begin making monthly payments of $100 for 2-years.If j12 = 8.4%,what is the equivalent cash price of the furniture?

Accepted Answer

A)  $2276.68
B)  $2261.89
C)  $2126.68
D)  $2111.89

Question 20

A loan of $10,000 is taken out today and is to be repaid over 2-years with weekly payments of $R at j52 = 10.4%,first payment one week from today.What is R?

Accepted Answer

A)  $86.60
B)  $101.34
C)  $106.60
D)  $111.40

Exam 3: Simple Annuities

Gary has determined he wants an annuity paying $10,000 a year for 10 years,with the first payment payable on his 60^th birthday.If j₁ = 8%,what single deposit must he make on his 40^th birthday to fund this annuity?

Sally deposits $10,200 today in a fund earning interest at j₂ = 6%.She wishes to withdraw $600 every 6 months for as long as possible,with the first withdrawal made today.Including the withdrawal made today,how many full withdrawals of $600 would she be able to make?

Sally can buy some furniture for $11,000 cash or monthly payments of $1000 for 1 year,with the first $1000 payment made today.What range contains the interest rate j₁₂ that Sally is being charged?

Jerry makes semi-annual deposits of $R into a fund paying j₂ = 5%.His first deposit was made on March 15,2011.His last deposit will be made on March 15,2015.On September 15,2015 he has accumulated $15,000 in the fund.What is R?

Betty,who just turned 17 today,receives an inheritance of $A.She will receive $5000 every 6 months for 10 years,starting the day she turns 25.If j₂ = 8%,what is A?

Bank A offers you a loan which you will repay over 5-years at j₁₂ = 6% with monthly payments of $1500.Bank B offers you the same loan amount,but at j₄ = 6%,which you will repay over 5-years with quarterly payments of $R.What is the maximum value of R for you to even consider Bank B?

An individual buys $15,000 worth of furniture.They make a down payment of $5000 and pay off the rest of their bill with quarterly payments of $R for 10 years.If j₄ = 8% and the first quarterly payment is made 3 months after the loan is advanced,what is R?

An investor wants to accumulate $10,000 at the end of 15 years by making 11 annual deposits of $R,1^st deposit to be made at the end of year 4.If j₁ = 7%,what is R?

Mrs.Smith makes 20 annual deposits of $2000 into a retirement savings account,first deposit made today.If she earns j₁ = 5% on her money,how much does she have 25 years from today?

A deposit of $10,000 is made today.Semi-annual withdrawals of $R are made for 15-years,first withdrawal made 6-months from today.The fund earns interest at j₂ = 10% for the first 6-years and j₂ = 6% thereafter.What is R?

A company wishes to accumulate $100,000.To do so,they will make quarterly deposits of $4000 into a fund paying interest at j₄ = 8%.It turns out they need to make 20 deposits,plus a smaller drop payment.What is the size of the drop payment needed?

You make quarterly deposits of $500.The first 12 deposits earn j₄ = 6%.Immediately after the 12^th deposit,the interest rate changes to j₄ = 4%.How much have you accumulated immediately after the 20^th deposit?

You deposit $100 every three months for the next 50 years,first deposit made today.If the interest rate is j₄ = 10%,how much do you have three months after your last deposit?

A payment of $25,000 is due on January 1,2014.To accumulate enough money to make this required payment,monthly deposits of $R were made into an account earning j12 = 6% starting on June 1,2012.If the last deposit is made on January 1,2014,what is R?

Trish needs to have $20,000 one year from now.She plans to make 9 equal monthly deposits,first deposit made today.What is the size of each deposit needed if the money is deposited into an account paying j₁₂ = 6%?

To buy some furniture,you can put $150 down and "don't pay a cent" for 6 months.At the end of 6 months,you begin making monthly payments of $100 for 2-years.If j₁₂ = 8.4%,what is the equivalent cash price of the furniture?

A loan of $10,000 is taken out today and is to be repaid over 2-years with weekly payments of $R at j₅₂ = 10.4%,first payment one week from today.What is R?