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42) Leo received $7,500 today and will receive another $5,000 two years from today. If he
invests these funds immediately at 11.5 percent, what will his investments be worth five years
from now?
A) $18,758.04
B) $18,806.39
C) $19,856.13
D) $20,314.00
E) $19,904.36
43) Suzette is receiving $10,000 today, $15,000 one year from today, and $25,000 four years
from today. If she invests these funds immediately and earns 9.6 percent annually, how much
will she have in savings 30 years from today?
A) $586,124.93
B) $591,414.14
C) $646,072.91
D) $620,008.77
E) $641,547.39
44) You would like to have $50,000 saved at the end of Year 5. At the end of Year 2, you can
deposit $7,500 for this purpose. If you earn 4.5 percent, how much must you deposit today to
reach your goal assuming no other deposits are made?
A) $33,254.58
B) $33,108.09
C) $34,276.34
D) $34,642.28
E) $34,912.63
45) The government imposed a fine on a firm that requires a payment of $100,000 today,
$150,000 one year from today, and $200,000 two years from today. The government will hold
the funds until the final payment is collected and then donate the entire amount to charity. How
much will be donated if the government pays 3 percent interest on the held funds?
A) $475,000
B) $460,590
C) $447,174
D) $451,050
E) $474,407
46) If you invest $2,500 today, an investment guarantees you will have $3,600 four years from
today. What rate of interest will you earn?
A) 8.72 percent
B) 9.03 percent
C) 8.68 percent
D) 9.39 percent
E) 9.54 percent
47) Eleven years ago, a guitar cost $1,800. Today, that same guitar costs $3,650. What has been
the inflation rate on this instrument?
A) 6.64 percent
B) 6.32 percent
C) 6.57 percent
D) 6.81 percent
E) 6.49 percent
48) Several years ago, Sara invested $4,208. Today, that investment is worth $28,406 and has
earned an average annual rate of return of 7.38 percent. How long ago did Sara make her
investment?
A) 31.09 years
B) 26.82 years
C) 18.98 years
D) 14.97 years
E) 23.03 years
49) Fred purchased a city lot for $39,900. That lot has appreciated at 6.5 percent annually and is
now valued at $287,400. How long has Fred owned this lot?
A) 26.87 years
B) 37.97 years
C) 33.09 years
D) 31.35 years
E) 29.11 years
50) Thirty-five years ago, your father invested $2,000. Today that investment is worth $98,407.
What annual rate of return has been earned on this investment?
A) 10.94 percent
B) 11.33 percent
C) 10.50 percent
D) 11.77 percent
E) 9.99 percent
51) Your credit card company charges you 1.35 percent per month. What is the annual
percentage rate on your account?
A) 16.45 percent
B) 16.30 percent
C) 16.39 percent
D) 16.20 percent
E) 16.56 percent
52) What is the annual percentage rate on a loan that charges interest of 1.65 percent per quarter?
A) 6.50 percent
B) 6.45 percent
C) 6.54 percent
D) 6.60 percent
E) 6.72 percent
53) A credit card compounds interest monthly and has an effective annual rate of 12.67 percent.
What is the annual percentage rate?
A) 12.35 percent
B) 12.00 percent
C) 11.99 percent
D) 11.87 percent
E) 11.93 percent
54) What is the effective annual rate if your credit card charges you 10.64 percent compounded
daily? (Assume a 365-day year.)
A) 10.79 percent
B) 11.22 percent
C) 11.95 percent
D) 11.48 percent
E) 12.01 percent
55) Taylor's Hardware offers credit at an APR of 14.9 percent and compounds interest monthly.
What actual rate of interest are they charging?
A) 13.97 percent
B) 14.90 percent
C) 15.48 percent
D) 15.96 percent
E) 16.10 percent
56) The pawn shop adds 2 percent to loan balances for every two weeks a loan is outstanding.
What is the effective annual rate of interest?
A) 79.97 percent
B) 73.08 percent
C) 51.21 percent
D) 67.34 percent
E) 83.43 percent
57) You have $2,500 to deposit into a savings account. The five banks in your area offer the
following rates. In which bank should you deposit your savings?
A) Bank A: 3.75%, compounded annually
B) Bank B: 3.69%, compounded monthly
C) Bank C: 3.70% compounded semiannually
D) Bank D: 3.67% compounded continuously
E) Bank E: 3.65% compounded quarterly
58) What is the effective annual rate of 10.25 percent compounded continuously?
A) 10.98 percent
B) 11.11 percent
C) 10.79 percent
D) 11.04 percent
E) 10.86 percent
59) Marcos will receive an annuity payment of $2,500, payable every two years, for the next ten
years. The next payment is due two years from today. What is the present value of this annuity at
a discount rate of 5 percent?
A) $10,466.67
B) $11,221.08
C) $9,416.75
D) $10,052.48
E) $8,949.60
60) The Smart Bank wants to be competitive based on quoted loan rates and thus must offer
loans at an annual percentage rate of 7.9 percent. What is the maximum rate the bank can
actually earn based on this quoted rate?
A) 7.90 percent
B) 8.18 percent
C) 8.20 percent
D) 8.22 percent
E) 8.39 percent
61) What is the future value of investing $5,650 for 14 years at a continuously compounded rate
of 8.6 percent?
A) $17,933.54
B) $16,685.44
C) $19,369.83
D) $18,833.85
E) $13,183.85
62) Assume you could invest $25,000 at a continuously compounded rate of 10 percent. What
would your investment be worth at the end of 50 years?
A) $2,933,054
B) $3,500,824
C) $3,911,215
D) $3,710,329
E) $3,648,029
63) Lucas invested $4,500 at 6.2 percent, compounded continuously. What will his investment
be worth after 15 years?
A) $15,557.78
B) $9,240.03
C) $11,405.29
D) $12,308.84
E) $8,685.00
64) A trust has been established to fund scholarships in perpetuity. The next annual distribution
will be $1,200 and future payments will increase by 3 percent per year. What is the value of this
trust at a discount rate of 7.4 percent?
A) $17,189.19
B) $19,960.00
C) $27,272.73
D) $24,609.11
E) $30,388.18
65) Benson's established a trust fund that provides $125,000 in college scholarships each year.
The trust fund earns 6.15 percent and distributes only its annual income. How much money did
Benson's contribute to establish this fund?
A) $2,291,613
B) $2,032,520
C) $2,150,000
D) $2,018,970
E) $1,987,408
66) A preferred stock pays an annual dividend of $6.50 a share and has an annual rate of return
of 7.35 percent. What is the stock price?
A) $74.50
B) $71.78
C) $92.09
D) $88.44
E) $77.78
67) You want to establish a trust fund that will provide $50,000 a year forever for your heirs. If
the fund can earn a guaranteed rate of return of 4.5 percent, how much must you deposit in a
solitary lump sum to establish this trust?
A) $1,333,333
B) $2,250,000
C) $1,250,000
D) $1,666,667
E) $1,111,111
68) You just paid $525,000 for a security that will pay you and your heirs $25,000 a year
forever. What rate of return will you earn?
A) 4.95 percent
B) 4.39 percent
C) 4.76 percent
D) 5.00 percent
E) 4.50 percent
69) Anna's grandmother established a trust and deposited $250,000 into it. The trust pays a
guaranteed 4.25 percent rate of return. Anna will receive all the interest earnings on an annual
basis and a charity will receive the principal amount at Anna's passing. How much income will
Anna receive each year?
A) $10,000
B) $8,500
C) $12,400
D) $10,625
E) $12,750
70) The preferred stock of ABC Co. offers a rate of return of 7.87 percent. The stock is currently
priced at $63.53 per share. What is the amount of the annual dividend?
A) $5.20
B) $5.00
C) $4.60
D) $5.50
E) $6.00
71) Olivia is willing to pay $185 a month for four years for a car payment. If the interest rate is
4.9 percent, compounded monthly, and she has a cash down payment of $2,500, what price car
can she afford to purchase?
A) $10,961.36
B) $10,549.07
C) $8,533.84
D) $8,686.82
E) $8,342.05
72) Tracie will receive payments of $550 a month for ten years. What are these payments worth
today at a discount rate of 6 percent, compounded monthly?
A) $49,540.40
B) $51,523.74
C) $53,737.08
D) $49,757.69
E) $48,808.17
73) Assume your employer will contribute $50 a week for twenty years to your retirement plan.
At a discount rate of 5 percent, compounded weekly, what is this employee benefit worth to you
today?
A) $29,144.43
B) $35,920.55
C) $32,861.08
D) $26,446.34
E) $36,519.02
74) Wilt has a consulting contract that calls for annual payments of $50,000 a year for five years
with the first payment due today. What is the current value of this contract if the discount rate is
8.4 percent?
A) $214,142.50
B) $201,867.47
C) $195,618.19
D) $197,548.43
E) $224,267.10
75) Uptown Industries just decided to save $3,000 a quarter for the next three years. The money
will earn 2.75 percent, compounded quarterly, and the first deposit will be made today. If the
company had wanted to deposit one lump sum today, rather than make quarterly deposits, how
much would it have had to deposit to have the same amount saved at the end of the three years?
A) $34,441.56
B) $34,678.35
C) $33,428.87
D) $33,687.23
E) $34,998.01
76) Scott has been offered an employment contract for ten years at a starting salary of $65,000
with guaranteed annual raises of 5 percent. What is the current value of this offer at a discount
rate of 7 percent?
A) $638,724.17
B) $602,409.91
C) $558,845.85
D) $630,500.00
E) $525,000.00
77) You need some money today and the only friend you have that has any is your 'miserly'
friend. He agrees to loan you the money you need, if you make payments of $20 a month for the
next six months. In keeping with his reputation, he requires that the first payment be paid today.
He also charges you 1.5 percent interest per month. How much total interest does he expect to
earn?
A) $3.94
B) $4.35
C) $1.34
D) $3.63
E) $5.96
78) Lois is purchasing an annuity that will pay $5,000 annually for 20 years, with the first
annuity payment made on the date of purchase. What is the value of the annuity on the purchase
date given a discount rate of 7 percent?
A) $54,282.98
B) $52,970.07
C) $56,677.98
D) $56,191.91
E) $66,916.21
79) Denise will receive annual payments of $10,000 for the next 25 years. The discount rate is
6.8 percent. What is the difference in the present value of these payments if they are paid at the
beginning of each year rather than at the end of each year?
A) $8,069.29
B) $9,216.67
C) $9,706.67
D) $8,382.04
E) $8,850.00
