Edward Johnson decided to open up a Roth IRA. He will invest $1,800 per year for the next 35 years

Edward Johnson decided to open up a Roth IRA. He will invest $1,800 per year for the next 35 years. Deposits to the Roth IRA will be made via a $150 payroll deduction at the end of each month. Assume that Edward will earn 8.75% annual interest compounded monthly over the life of the IRA. How much will he have at the end of 35 years?

A) $125,250

B) $250,321

C) $363,000

D) $414,405

Suppose that you wish to save for your child's college education by opening up an educational IRA. You plan to deposit $100 per month into the IRA for the next 18 years. Assume that you will be able to earn 10%, compounded monthly, on your investment. How much will you have accumulated at the end of 18 years?

A) $21,600

B) $54,719

C) $33,548

D) $85,920

E) $60,056

What is a series of equal payments for a finite period of time called?

A) A perpetuity

B) An axiom

C) A lump sum

D) An annuity

Which of the following statements is true?

A) The future value of an annuity would be greater if funds are invested at the beginning of each period instead of at the end of each period.

B) An annuity is a series of equal payments that are made, or received, forever.

C) The effective annual rate (APR) of a loan is higher the less frequently payments are made.

D) The future value of an annuity would be greater if funds are invested at the end of each period rather than at the beginning of each period.

What is a series of equal payments to be received at the end of each period, for a finite period of time, called?

A) A perpetuity

B) An annuity due

C) A cash cow

D) A deferred annuity

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)

You have borrowed $70,000 to buy rental property. You plan to make monthly payments over a 15-year period

You have borrowed $70,000 to buy rental property. You plan to make monthly payments over a 15-year period. The bank has offered you a 9% interest rate compounded monthly. Calculate the principal paid to the bank in month two of the loan. Assume end-of-period payments.

A) $184.01

B) $186.38

C) $188.46

D) $190.64

E) $192.73

A friend of yours plans to begin saving for retirement by depositing $2,000 at the end of each year for the next 25 years. If she can earn 10% annually on her investment, how much will she have accumulated at the end of 25 years?

A) $50,000

B) $196,692

C) $100,000

D) $216,361

How much must you deposit at the end of each of the next 10 years in a savings account paying 5% annually in order to have $10,000 saved by the end of the 10th year?

A) $1,000

B) $1,638

C) $1,500

D) $795

What is the value today of an investment that pays $500 every year at year-end during the next 15 years if the annual interest rate is 9%?

A) $4,030.50

B) $7,500.00

C) $3,500.00

D) $7,000.00

How much would an investor be willing to pay today for an investment that returns $1,000 every year at year-end for five years if he wants to earn a 10% annual return on the investment?

A) $1,000

B) $3,791

C) $5,000

D) $7,700

A friend of yours would like you to lend him $5,000 today to be paid back in 5 annual payments. What would be the equal annual end-of-year payment on this loan if you charge your friend 7% interest?

A) $869.45

B) $1,000.00

C) $1,219.51

D) $1,350.00

Recently you borrowed money for a new car. The loan amount is $15,000 to be paid back in equal annual payments which begin today, and will continue to be payable at the beginning of each year for a total of five years. Interest on the loan is 8%. What is the amount of the loan payment?

A) $3,756.85

B) $4,200.00

C) $3,478.31

D) $3,000.00

You buy a race horse, which has a winning streak for four years, bringing in $500,000 per year, and then it dies of a heart attack

You buy a race horse, which has a winning streak for four years, bringing in $500,000 per year, and then it dies of a heart attack. If you paid $1,518,675 for the horse four years ago, what was your annual return over this four-year period?

A) 8%

B) 33%

C) 18%

D) 12%

You are considering a home loan with monthly payments at an annual percentage yield of 5.116%. What is the quoted rate of interest on the loan?

A) 4.5%

B) 4.75%

C) 5%

D) 6%

You deposited $2,000 in a bank account paying 6% on January 1, 2004, and then you made $2,000 deposits on January 1 in 2005 and 2006. Which of the following expressions will calculate your bank balance just after the last payment was deposited?

A) FV = $2,000[1.06]-1 + $2,000[1.06]-2 + $2,000[1.06]-3 

B) FV = $2,000[1.06]1 + $2,000[1.06]2 + $2,000[1.06]3 

C) FV = $2,000[1.06]0 + $2,000[1.06]1 + $2,000[1.06]2 

D) FV = $2,000[1.06]-0 + $2,000[1.06]-1 + $2,000[1.06]-2 + $1,000[1.06]-3 

Harry just bought a new four-wheel-drive Jeep Cherokee for his lumber business. The price of the vehicle was $35,000, of which he made a $5,000 down payment and took out an amortized loan for the rest. His local bank made the loan at 12% interest for five years. He is to pay back the principal and interest in five equal annual installments beginning one year from now. Determine the amount of Harry's annual payment.

A) $8,322

B) $9,600

C) $9,709

D) $6,720

Your investment goal is to have $3,000,000 in 40 years for retirement. You decide to invest in a mutual fund today that pays 12% per year compounded monthly. How much must you invest at the end of each month to meet your investment goal? Round to the nearest $1.

A) $245

B) $255

C) $285

D) $305

E) $315

You have borrowed $70,000 to buy a sports car. You plan to make monthly payments over a 15-year period. The bank has offered you a 9% interest rate compounded monthly. Calculate the total amount of interest dollars you will pay the bank over the life of the loan. Round to the nearest dollar and assume end-of-month payments.

A) $47,451

B) $51,644

C) $54,776

D) $57,798

George and Laura will be retiring in four years and would like to buy a lake house. They estimate that they will need $550,000

George and Laura will be retiring in four years and would like to buy a lake house. They estimate that they will need $550,000 at the end of four years to buy this house. They want to make four equal annual payments into an account at the end of each year. If they can earn 8% on their money, compounded annually, over the next four years, how much must they invest at the end of each year for the next four years to have accumulated $550,000 by retirement?

A) $137,500

B) $122,056

C) $113,015

D) $131,821

You have been accepted to study gourmet cooking at Le Cordon Bleu Culinary Institute in Paris, France. You will need $15,000 every six months (beginning six months from now) for the next three years to cover tuition and living expenses. Mom and Dad have agreed to pay for your education. They want to make one deposit now in a bank account earning 6% interest, compounded semiannually, so that you can withdraw $15,000 every six months for the next three years. How much must they deposit now?

A) $97,026

B) $73,760

C) $90,000

D) $81,258

Horace and Myrtle want to buy a house. Their banker offered them a fully amortizing $95,000 loan at a 12% annual rate for 20 years. What will their monthly payment be if they make equal monthly installments over the next 20 years?

A) $1,046

B) $749

C) $1,722

D) $1,346

Harold Hawkins bought a home for $320,000. He made a down payment of $45,000; the balance will be paid off over 30 years at a 6.775% rate of interest. How much will Harold's monthly payments be? Round off to the nearest $1.

A) $1,450

B) $1,788

C) $3,200

D) $1,682

You are going to pay $100 into an account at the beginning of each of the next 40 years. At the beginning of the 41st year

Use the following information in solving the following question(s).

You are going to pay $100 into an account at the beginning of each of the next 40 years. At the beginning of the 41st year, you buy a 30-year annuity whose first payment comes at the end of the 41st year (the account pays 12%).

How much money will be in the account at the end of year 40 (round to the nearest $1,000)?

A) $77,000

B) $86,000

C) $69,000

D) $93,000

How much will you receive at the end of the 41st year (i.e., the first annuity payment)? Round to the nearest $100.

A) $93,000

B) $7,800

C) $11,400

D) $10,700

A retirement plan guarantees to pay you or your estate a fixed amount for 20 years. At the time of retirement, you will have $31,360 to your credit in the plan. The plan anticipates earning 8% interest annually over the period you receive benefits. How much will your annual benefits be, assuming the first payment occurs one year from your retirement date?

A) $682

B) $6,272

C) $2,000

D) $3,194

SellUCars, Inc. offers you a car loan at an annual interest rate of 8% compounded monthly. What is the annual percentage yield of the loan?

A) 8.00%

B) 8.24%

C) 8.30%

D) 8.44%

If you put $510 in a savings account at the beginning of each year for 30 years, how much money will be in the account

If you put $510 in a savings account at the beginning of each year for 30 years, how much money will be in the account at the end of the 30th year? Assume that the account earns 5%, and round to the nearest $100.

A) $33,300

B) $32,300

C) $33,900

D) None of the above

If you put $10 in a savings account at the beginning of each year for 11 years, how much money will be in the account at the end of the 11th year? Assume that the account earns 11%, and round to the nearest $100.

A) $220

B) $200

C) $190

D) $180

To find the present value of an annuity due, one could

A) find the present value of an ordinary annuity and add one extra payment.

B) find the present value of an ordinary annuity but N = 1 for the number of periods.

C) find the present value of an ordinary annuity and divide by 1 + i.

D) find the present value of an ordinary annuity and multiply by 1 + i.

How much money must you pay into an account at the beginning of each of 30 years in order to have $10,000 at the end of the 30th year? Assume that the account pays 11% per annum, and round to the nearest $1.

A) $39

B) $46

C) $50

D) None of the above

How much money must you pay into an account at the beginning of each of 20 years in order to have $10,000 at the end of the 20th year? Assume that the account pays 12% per annum, and round to the nearest $1.

A) $1,195

B) $111

C) $124

D) $139

How much money must you pay into an account at the beginning of each of five years in order to have $5,000 at the end of the fifth year? Assume that the account pays 12% per year, and round to the nearest $10.

A) $700

B) $1,390

C) $1,550

D) $790

How much money must you pay into an account at the beginning of each of 11 years in order to have $5,000 at the end of the 11th year? Assume that the account pays 8% per year, and round to the nearest $1.

A) $700

B) $257

C) $300

D) $278