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50) The Masterson family is setting up a vacation fund, and they plan on depositing $1,000 per quarter
in an investment that will pay 12% annual interest. What amount will they have available for their
vacation at the end of 2 years? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate
factor(s) from the tables provided.)
A) $8,960.00 B) $8,000.00 C) $8,240.00 D) $8,892.30 E) $8,487.20
51) A company needs to have $150,000 in 5 years, and will create a fund to insure that the $150,000
will be available. If it can earn a 6% return compounded annually, how much must the company
invest in the fund today to equal the $150,000 at the end of 5 years? (PV of $1, FV of $1, PVA of
$1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
A) $112,095 B) $141,000 C) $105,000 D) $100,000 E) $45,000
52) Jackson has a loan that requires a $17,000 lump sum payment at the end of four years. The interest
rate on the loan is 5%, compounded annually. How much did Jackson borrow today? (PV of $1,
FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
A) $15,343 B) $11,504 C) $16,150 D) $13,986 E) $13,600
53) A company has $46,000 today to invest in a fund that will earn 4% compounded annually. How
much will the fund contain at the end of 6 years? (PV of $1, FV of $1, PVA of $1, and FVA of $1)
(Use appropriate factor(s) from the tables provided.)
A) $62,582 B) $47,840 C) $57,040 D) $58,075 E) $58,204
SHORT ANSWER QUESTIONS
54) Define interest.
ESSAY QUESTIONS
55) Explain the concept of the present value of a single amount.
SHORT ANSWER QUESTIONS
56) Explain the concept of the future value of a single amount.
57) Explain the concept of the present value of an annuity.
58) Explain the concept of the future value of an annuity.
59) A company needs to have $200,000 in 4 years, and will create a fund to insure that the $200,000
will be available. If it can earn a 7% return compounded annually, how much must the company
invest in the fund today to equal the $200,000 at the end of 4 years?
60) A company needs to have $150,000 in 5 years, and will create a fund to insure that the $150,000
will be available. If it can earn a 6% return compounded annually, how much must the company
invest in the fund today to equal the $150,000 at the end of 5 years?
61) Kelsey has a loan that requires a $25,000 lump sum payment at the end of three years. The interest
rate on the loan is 5%, compounded annually. How much did Kelsey borrow today?
62) Jackson has a loan that requires a $17,000 lump sum payment at the end of four years. The interest
rate on the loan is 5%, compounded annually. How much did Jackson borrow today?
63) Mason Company has acquired a machine from a dealer that requires a payment of $45,000 at the
end of five years. This transaction includes interest at 8%, compounded semiannually. What is the
value of the machine today?
64) Protocol Company has acquired equipment from a dealer that requires equal payments of $12,000
at the end of each of the next five years. This transaction includes interest at 9%, compounded
annually. What is the value of the machine today?
65) A company is creating a fund today by depositing $65,763. The fund will grow to $90,000 after 8
years. What annual interest rate is the company earning on the fund?
66) A company is setting aside $21,354 today, and wishes to have $30,000 at the end of three years for
a down payment on a piece of property. What interest rate must the company earn?
67) A company has $50,000 today to invest in a fund that will earn 7%. How much will the fund
contain at the end of 8 years?
68) A company has $46,000 today to invest in a fund that will earn 4% compounded annually. How
much will the fund contain at the end of 6 years?
69) Trey has $105,000 now. He has a loan of $175,000 that he must pay at the end of 5 years. He can
invest his $105,000 at 10% interest compounded semiannually. Will Trey have enough to pay his
loan at the end of the 5 years?
70) Garcia Brass Fixtures is planning on replacing one of its machines in five years by making a
one-time deposit of $20,000 today and four yearly contributions of $5,000 beginning at the end of
year 1. The deposits will earn 10% interest. How much money will Garcia have accumulated at the
end of five years to replace the machine?
71) A company borrows money from the bank by promising to make 6 annual year-end payments of
$27,000 each. How much is the company able to borrow if the interest rate is 9%?
72) A company borrows money from the bank by promising to make 8 semiannual payments of $9,000
each. How much is the company able to borrow if the interest rate is 10% compounded
semiannually?
73) When you reach retirement age, you will have one fund of $100,000 from which you are going to
make annual withdrawals of $14,702. The fund will earn 6% per year. For how many years will
you be able to draw an even amount of $14,702?
74) City Peewee League borrowed $883,212, and must make annual year-end payments of $120,000
each. If City's interest rate is 6%, how many years will it take to pay off the loan?
75) Giuliani Co. lends $524,210 to Craig Corporation. The terms of the loan require that Craig make
six semiannual period-end payments of $100,000 each. What semiannual interest rate is Craig
paying on the loan?
76) A company is beginning a savings plan. It will be saving $15,000 per year for the next 10 years.
How much will the company have accumulated after the tenth year-end deposit, assuming the fund
earns 10% interest?
77) A company is beginning a savings plan to purchase a new building. It will be saving $43,000 per
year for the next 10 years. How much will the company have accumulated after the tenth year-end
deposit, assuming the fund earns 9% interest?
78) You are little late planning your retirement, but are looking forward to retiring in 10 years. You
expect to save $6,000 a year at an annual rate of 8%. How much will you have accumulated when
you retire?
79) A company is setting up a sinking fund to pay off $8,654,000 in bonds that are due in 7 years. The
fund will earn 7% interest, and the company intends to put away a series of equal year-end amounts
for 7 years. What is the amount of the annual deposits that the company must make?
80) ________ is a borrower's payment to the owner of an asset for its use.
81) The interest rate is also called the ________ rate.
82) To calculate present value of an amount, two factors are required: The ________ and the________.
83) An _ _ is a series of equal payments occurring at equal intervals.
84) The future value of an ________ annuity is the accumulated value of each annuity payment with
interest as of the date of the final payment.
