Your parents are planning to retire in Phoenix, AZ in 20 years. Currently, the typical house that pleases your parents costs $200,000

Your parents are planning to retire in Phoenix, AZ in 20 years. Currently, the typical house that pleases your parents costs $200,000, but they expect inflation to increase the price of the house at a rate of 4% over the next 20 years. To buy a house upon retirement, what must they save each year in equal annual end-of-year deposits if they can earn 10% annually?

A) $21,910.00

B) $7,650.94

C) $10,000.00

D) $14,715.52

You intend to purchase a new car upon graduation in two years. It will have a cost of $29,371, including all extra features and sales tax. You just received a $3,000 pre-graduation gift from your rich uncle that you intend to deposit in a money market account that pays 6% interest, compounded monthly.  If you use the amount in the money market account for a down payment, and take out an auto loan for the remainder, how much will you need to borrow? (Round to the nearest dollar.)

A) $29,371

B) $25,880

C) $26,371

D) $26,000

 Assume that two investments have a three-year life and generate the cash flows shown below. Which of the two would you prefer?

       Year                  Investment A         Investment B

           1                            $5,000                       $8,000

           2                            $5,000                       $5,000

           3                            $5,000                       $2,000

A) Investment A, since it has the most even cash flows

B) Investment B, since it gives you the largest cash flows in earlier years

C) Neither, since they both have equal lives

D) Both investments are equally attractive

You have just purchased an investment that generates the cash flows that are shown below. You are able to invest your money at 5.75%, compounded annually. How much is this investment worth today?

       Year                       Amount

           0                                $0

           1                            $1,250

           2                            $1,585

           3                            $1,750

           4                            $2,225

           5                            $3,450

A) $7,758

B) $4,521

C) $10,260

D) $8,467

Congratulations. You just won the California State Lottery. The amount awarded is paid in 20 equal annual installments

Congratulations. You just won the California State Lottery. The amount awarded is paid in 20 equal annual installments, at the beginning of each year. You can invest your money at 6.6%, compounded annually. You have calculated that the lottery is worth $20,975,400 today. How much was the amount awarded?

A) $75,310,294

B) $36,000,000

C) $81,047,770

D) $42,000,000

A friend of yours borrows $19,500 from the bank at 8% annually to be repaid in 10 equal annual end-of-year installments. The interest paid on this loan in year three is

A) $1,336.01.

B) $1,560.00.

C) $2,906.11.

D) $1,947.10.

If a loan of $10,000 is paid back in equal annual end-of-year payments of $2,570.69 during the next five years, what is the annual interest rate on the loan?

A) 2%

B) 5%

C) 9%

D) 12%

What is the present value of an investment that pays $10,000 every year at year-end for the next five years and $15,000 every year at year-end for years six through 10? The annual rate of interest for the investment is 9%.

A) $125,000.00

B) $97,250.00

C) $135,173.00

D) $76,827.50

If you have $375,000 in an account earning 9% annually, what constant amount could you withdraw each year and have nothing remaining at the end of 20 years?

A) $7,500

B) $18,750

C) $66,912

D) $5,575

E) $41,080

You wish to borrow $12,000 to be repaid in 60 monthly installments of $257.93. The annual interest rate is

A) 10.50%.

B) 12.75%.

C) 15.25%.

D) 6.50%.

E) 8.80%.

You wish to purchase a condo at a cost of $175,000. You are able to make a down payment of $35,000 and will borrow $140,000 for 30 years at an interest rate of 7.25%. How much is your monthly payment? To solve this problems with an EXCEL spreadsheet, you would enter

A) =PMT(7.25/12,360,140000,0,1)

B) =PMT(.0725/12,360,140000,0,1)

C) =PMT(7.25,30,140000,0,1) /12

D) =PMT(.0725/12,360,175000,0,1)