Chapter 05: Time Value of Money
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85. Five years ago, Weed Go Inc. earned $1.50 per share. Its earnings this year were $3.20. What was the growth rate in
earnings per share (EPS) over the 5-year period?
a. 16.36%
b. 19.31%
c. 14.07%
d. 16.69%
e. 18.49%
86. Janice has $5,000 invested in a bank that pays 11.0% annually. How long will it take for her funds to triple?
a. 10.32 years
b. 10.53 years
c. 9.68 years
d. 10.11 years
e. 10.42 years
Chapter 05: Time Value of Money
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95. You want to quit your job and return to school for an MBA degree 3 years from now, and you plan to save $5,600 per
year, beginning immediately. You will make 3 deposits in an account that pays 5.2% interest. Under these assumptions,
how much will you have 3 years from today?
a. $18,608.56
b. $21,772.01
c. $16,747.70
d. $15,259.02
e. $22,516.35
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e. $22,138.31
102. What’s the present value of a perpetuity that pays $3,900 per year if the appropriate interest rate is 5%?
a. $78,000.00
b. $95,940.00
c. $96,720.00
d. $83,460.00
e. $86,580.00
103. What’s the rate of return you would earn if you paid $2,880 for a perpetuity that pays $85 per year?
a. 3.04%
b. 3.19%
c. 3.48%
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d. 2.42%
e. 2.95%
104. You have a chance to buy an annuity that pays $3,300 at the beginning of each year for 3 years. You could earn 5.5%
on your money in other investments with equal risk. What is the most you should pay for the annuity?
a. $9,392.86
b. $7,420.36
c. $7,138.57
d. $10,426.07
e. $10,801.78
105. You have a chance to buy an annuity that pays $24,000 at the beginning of each year for 5 years. You could earn
4.5% on your money in other investments with equal risk. What is the most you should pay for the annuity?
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a. $110,100.62
b. $128,817.72
c. $131,019.73
d. $114,504.64
e. $94,686.53
106. Your uncle is about to retire, and he wants to buy an annuity that will provide him with $53,000 of income a year for
20 years, with the first payment coming immediately. The going rate on such annuities is 5.25%. How much would it cost
him to buy the annuity today?
a. $558,149.79
b. $775,964.35
c. $680,670.48
d. $769,157.64
e. $714,704.01
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112. Your uncle has $1,375,000 and wants to retire. He expects to live for another 25 years and to earn 7.5% on his
invested funds. How much could he withdraw at the end of each of the next 25 years and end up with zero in the account?
a. $92,514.13
b. $127,052.74
c. $97,448.22
d. $123,352.17
e. $124,585.70
113. Your uncle has $485,000 and wants to retire. He expects to live for another 25 years, and he also expects to earn
7.5% on his invested funds. How much could he withdraw at the beginning of each of the next 25 years and end up with
zero in the account?
a. $40,474.12
b. $35,617.22
c. $39,259.89
d. $50,592.65
e. $47,759.46
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a. 45.99
b. 35.77
c. 42.58
d. 36.62
e. 51.53
120. Suppose you just won the state lottery, and you have a choice between receiving $3,025,000 today or a 20-year
annuity of $250,000, with the first payment coming one year from today. What rate of return is built into the annuity?
Disregard taxes.
a. 5.62%
b. 5.35%
c. 3.95%
d. 6.65%
e. 6.34%