74) Clint just won a prize that will pay him $15,000 a year for 15 years, starting at the end of Year
5. What is the current value of this prize if the discount rate is 7 percent, compounded annually?
A) $102,655.52
B) $98,550.64
C) $104,225.76
D) $116,191.91
E) $108,806.61
75) You are comparing two annuities with equal present values. The applicable discount rate is
6.65 percent, compounded annually. One annuity pays $4,500 on the first day of each year for 25
years. How much does the second annuity pay each year for 25 years if it pays at the end of each
year?
A) $4,708.03
B) $4,623.87
C) $4,608.51
D) $4,799.25
E) $4,747.50
76) Martha receives $200 on the first of each month. Stewart receives $200 on the last day of each
month. Both Martha and Stewart will receive payments for 30 years. The discount rate is 9 percent,
compounded monthly. What is the difference in the present value of these two sets of payments?
A) $186.43
B) $194.29
C) $192.60
D) $188.05
E) $191.13
77) An investment will pay $5,500 every 2 years for the next 40 years. The annual rate of interest is
12 percent. What is the value of this investment at the end of Year 40?
A) $1,630,590.34
B) $1,096,222.20
C) $1,206,504.11
D) $1,353,997.81
E) $1,990,095.67
78) The Life Trust Co. purchased an investment that will pay $5,000 next year. Every year
thereafter, the payment will increase by 1.25 percent. What is the value of this investment if the
required rate of return is 8.3 percent?
A) $62,300.00
B) $60,993.98
C) $65,647.81
D) $70,921.99
E) $73,984.23
79) Today, the Future Trust Co. purchased an investment that will pay $6,000 at the end of 5 years.
Every year thereafter, the payment will increase by 1.6 percent. What is the value of this
investment today if the required rate of return is 7.4 percent?
A) $62,300.00
B) $73,894.23
C) $65,647.81
D) $77,751.03
E) $83,984.23
80) Today, you are retiring. You have a total of $387,419 in your retirement savings and have the
funds invested at a guaranteed 3.68 percent, compounded monthly. You want to withdraw $1,500
at the beginning of every month, starting today. You also want the withdrawals to stop when your
account balance declines to $100,000. For how many years can you make withdrawals?
A) 36.52 years
B) 34.43 years
C) 34.22 years
D) 35.24 years
E) 36.22 years
81) Westover Ridge has a management contract with its president that requires a lump sum
payment of $15 million to be paid upon the completion of the president’s first 5 years of service.
The company can earn 6.5 percent on its investments and wants to set aside an equal amount of
money each year over the next 5 years to fund this obligation. How much money must the firm
save each year?
A) $2,895,734.60
B) $2,698,346.17
C) $2,401,033.67
D) $2,634,518.06
E) $2,848,018.22
82) You retire at age 66 and expect to live another 25 years. On the day you retire, you have
$128,500 saved. You expect to earn 4.5 percent, compounded monthly. How much can you
withdraw from your savings each month if you plan to die on the day you spend your last penny?
A) $801.96
B) $684.05
C) $798.17
D) $672.95
E) $714.24
83) You have $187,620 saved today and plan to withdraw $9,000 a year. How long can you make
these withdrawals if you earn an annual percentage rate of 4.8 percent?
A) 84.96 years
B) 40.48 years
C) Forever
D) 38.08 years
E) 68.24 years
84) Outreach Funds established a trust that provides $150,000 in scholarships each year forever.
The trust fund earns a rate of return of 4.03 percent. How much money was contributed to the fund
20 years ago, assuming that only the interest income is distributed?
A) $2,291,613.13
B) $3,722,084.37
C) $3,225,000.00
D) $3,000,000.00
E) $3,100,348.24
85) Beta preferred stock pays an annual dividend of $4.80 a share. How much should you pay to
purchase one share if you require a rate of return of 15.6 percent?
A) $31.09
B) $28.25
C) $30.77
D) $34.12
E) $28.16
86) You are the recipient of an inheritance that will pay you and your heirs $13,000 a year forever.
What is this inheritance worth today at a discount rate of 5.85 percent?
A) $222,222.22
B) $239,250.00
C) $211,953.94
D) $241,141.41
E) $236,004.98
87) Tracie invested $60,000 in exchange for payments of $2,500 a year forever. What rate of return
is she earning?
A) 4.25%
B) 4.17%
C) 4.43%
D) 4.50%
E) 4.67%
88) The Uptown Development project is expected to provide a cash flow of $18,600 next year with
annual increases of 3.5 percent for 15 years. After that, the project will be worthless. What is the
present value of this project at a discount rate of 17 percent, compounded annually?
A) $251,987.56
B) $115,875.14
C) $103,206.07
D) $121,008.67
E) $247,266.41
89) You have just obtained a 5-year pure discount loan in the amount of $75,000 at 6.28 percent
interest, compounded monthly. What total amount will you have to repay?
A) $102,582.70
B) $87,370.00
C) $84,219.16
D) $105,260.13
E) $96,100.84
90) Wings and More purchased a piece of property for $1.8 million. It paid a down payment of 20
percent in cash and financed the balance. The loan terms require monthly payments for 15 years at
an annual percentage rate of 4.60 percent, compounded monthly. What is the amount of each
mortgage payment?
A) $12,440.01
B) $11,029.33
C) $10,236.25
D) $10,799.18
E) $11,089.64
91) Alex estimates that he will have $47,500 in student loans by the time he graduates. The interest
rate is 7.2 percent, compounded monthly. If he wants to have this debt paid in full within 5 years
following graduation, how much must he pay each month?
A) $745.69
B) $873.65
C) $945.05
D) $741.67
E) $980.40
92) Keane just borrowed $38,700 for 5 years at an interest rate of 5.9 percent, compounded
monthly. What is the amount of each monthly loan payment?
A) $627.62
B) $721.60
C) $630.62
D) $746.38
E) $693.04
93) Shawn borrowed $132,600 at 4.25 percent for 30 years to purchase a home. Payments are to be
paid monthly. If all payments are paid as agreed, how much total interest will be paid? (Round the
monthly payment to two decimal places when computing the total interest paid.)
A) $86,086.67
B) $108,161.08
C) $102,231.60
D) $97,086.67
E) $78,400.30
94) Texas Foods has a loan that requires one lump sum payment at the end of 12 years in the
amount of $139,000. The interest rate is 5.8 percent, compounded monthly. What amount did the
firm borrow?
A) $75,209.79
B) $69,418.30
C) $82,706.63
D) $84,613.03
E) $72,461.16
95) Today, the Corner Store borrowed $11,680 at 6.3 percent, compounded monthly. The loan
payment is $195.23 a month. How many loan payments must the firm make before the loan is paid
in full?
A) 72 years
B) 60 years
C) 48 years
D) 72 months
E) 60 months
96) Juniper Stores borrowed $98,000 for 5 years at an interest rate of 6.7 percent, compounded
annually. The loan requires the payment of the annual interest plus $19,600 of principal each year.
What is the amount of the total loan payment in Year 3?
A) $22,766.67
B) $24,033.33
C) $23,539.60
D) $22,848.20
E) $23,600.67
97) Aeron Electrics borrowed $160,000 for 4 years at an interest rate of 6 percent, compounded
annually. The loan requires repayment of the interest annually. In addition, the principal must be
repaid in equal annual payments. What is the amount of the total loan payment in Year 3?
A) $42,400.00
B) $43,600.00
C) $50,499.08
D) $47,277.20
E) $44,800.00
98) A 5-year loan in the amount of $48,000 is to be repaid in equal annual payments. What is the
remaining principal balance after the third payment if the interest rate is 5 percent, compounded
annually?
A) $22,173.58
B) $18,294.24
C) $22,998.30
D) $18,677.70
E) $20,614.89
99) A loan in the amount of $212,000 is to be repaid in equal annual payments over 15 years. The
interest rate is 7 percent, compounded annually. What is the amount of interest that is included in
the loan payment for Year 3?
A) $13,617.56
B) $12,721.88
C) $13,885.85
D) $11,221.07
E) $12,454.19
100) Jensen’s Shipping is expected to produce an annual cash flow of $218,900 next year.
Thereafter, this cash flow is expected to decrease by 1.6 percent per year indefinitely. What is this
firm worth today at a discount rate of 18 percent?
A) $1,116,836.74
B) $1,424,350.00
C) $1,394,210.53
D) $1,334,756.10
E) $1,221,400.00
101) TL Enterprises (TLE) is considering purchasing DMM. DMM has expected cash flows of
$42,800, $56,700, and $37,100 for the next 3 years, respectively. After that, the products DMM
produces will be obsolete and thus DMM will be worthless. If TLE requires a return of 18 percent,
what amount should they offer as a purchase price?
A) $87,141.41
B) $102,247.79
C) $85,868.09
D) $91,216.57
E) $99,572.45