Question 1

Your uncle has $300,000 invested at 7.5%,and he now wants to retire.He wants to withdraw $35,000 at the end of each year,beginning at the end of this year.He also wants to have $25,000 left to give you when he ceases to withdraw funds from the account.What is the maximum number of $35,000 withdrawals that he can make and still have at least $25,000 left in the account? (Hint: If your solution for N is not an integer,round down to the nearest whole number.)

Accepted Answer

A)   12
B)   13
C)   14
D)   15
E)   16F) All of the above
G) A) and B)

Question 2

As a result of compounding,the effective annual rate on a bank deposit (or a loan)is always equal to or greater than the nominal rate on the deposit (or loan).

Accepted Answer

A) True 
 B)False

Question 3

Assume that you own an annuity that will pay you $15,000 per year for 12 years,with the first payment being made today.You need money today to open a new restaurant,and your uncle offers to give you $120,000 for the annuity.If you sell it,what rate of return would your uncle earn on his investment?

Accepted Answer

A)   6.85%
B)   7.21%
C)   7.59%
D)   7.99%
E)   8.41%F) A) and B)
G) C) and E)

Question 4

Suppose you borrowed $12,000 at a rate of 9.0% and must repay it in 4 equal installments at the end of each of the next 4 years.How large would your payments be?

Accepted Answer

A)   $3,704.02
B)   $3,889.23
C)   $4,083.69
D)   $4,287.87
E)   $4,502.26F) A) and D)
G) All of the above

Question 5

Time lines can be constructed in situations where some of the cash flows occur annually but others occur quarterly.

Accepted Answer

A) True 
 B)False

Question 6

Suppose you deposited $5,000 in a bank account that pays 5.25% with daily compounding based on a 360-day year.How much would be in the account after 8 months,assuming each month has 30 days?

Accepted Answer

A)   $5,178.09
B)   $5,436.99
C)   $5,708.84
D)   $5,994.28
E)   $6,294.00F) A) and C)
G) B) and D)

Question 7

You are hoping to buy a new boat 3 years from now,and you plan to save $4,200 per year,beginning one year from today.You will deposit your savings in an account that pays 5.2% interest.How much will you have just after you make the 3rd deposit,3 years from now?

Accepted Answer

A)   $11,973
B)   $12,603
C)   $13,267
D)   $13,930
E)   $14,626F) A) and E)
G) D) and E)

Question 8

Time lines cannot be constructed for annuities unless all the payments occur at the end of the periods.

Accepted Answer

A) True 
 B)False

Exam 4: Time Value of Money

Suppose you deposited $5,000 in a bank account that pays 5.25% with daily compounding based on a 360-day year.How much would be in the account after 8 months,assuming each month has 30 days?

Correct Answer
verified

You are hoping to buy a new boat 3 years from now,and you plan to save $4,200 per year,beginning one year from today.You will deposit your savings in an account that pays 5.2% interest.How much will you have just after you make the 3rd deposit,3 years from now?

Correct Answer
verified

Suppose you borrowed $12,000 at a rate of 9.0% and must repay it in 4 equal installments at the end of each of the next 4 years.How large would your payments be?

Correct Answer
verified

Correct Answer
verified

Time lines cannot be constructed for annuities unless all the payments occur at the end of the periods.

Correct Answer
verified

Assume that you own an annuity that will pay you $15,000 per year for 12 years,with the first payment being made today.You need money today to open a new restaurant,and your uncle offers to give you $120,000 for the annuity.If you sell it,what rate of return would your uncle earn on his investment?

Correct Answer
verified

Time lines can be constructed in situations where some of the cash flows occur annually but others occur quarterly.

Correct Answer
verified

As a result of compounding,the effective annual rate on a bank deposit (or a loan)is always equal to or greater than the nominal rate on the deposit (or loan).

Correct Answer
verified

Exam 4: Time Value of Money

Suppose you deposited $5,000 in a bank account that pays 5.25% with daily compounding based on a 360-day year.How much would be in the account after 8 months,assuming each month has 30 days?

Correct AnswerverifiedShow Answer

You are hoping to buy a new boat 3 years from now,and you plan to save $4,200 per year,beginning one year from today.You will deposit your savings in an account that pays 5.2% interest.How much will you have just after you make the 3rd deposit,3 years from now?

Correct AnswerverifiedShow Answer

Suppose you borrowed $12,000 at a rate of 9.0% and must repay it in 4 equal installments at the end of each of the next 4 years.How large would your payments be?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Time lines cannot be constructed for annuities unless all the payments occur at the end of the periods.

Correct AnswerverifiedShow Answer

Assume that you own an annuity that will pay you $15,000 per year for 12 years,with the first payment being made today.You need money today to open a new restaurant,and your uncle offers to give you $120,000 for the annuity.If you sell it,what rate of return would your uncle earn on his investment?

Correct AnswerverifiedShow Answer

Time lines can be constructed in situations where some of the cash flows occur annually but others occur quarterly.

Correct AnswerverifiedShow Answer

As a result of compounding,the effective annual rate on a bank deposit (or a loan)is always equal to or greater than the nominal rate on the deposit (or loan).

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
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