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48) A proposed 3-year project has expected annual cash inflows of $5,600, $7,900, and $11,200,
for Years 1 to 3, respectively. What is the net present value of this project at a discount rate of 16
percent if the initial cost is $7,800?
A) $10,713.62
B) $10,073.94
C) $14,103.18
D) $12,292.25
E) $9,899.36
49) 1 year ago, the Jenkins Center opened an investment account and deposited $5,000. Today, it is
depositing an additional $6,000 and will make a final deposit of $7,500 1 year from now. How
much will the firm have saved 3 years from now if it earns an average annual return of 6.5 percent?
A) $19,159.67
B) $22,430.84
C) $23,628.86
D) $20,832.60
E) $22,186.72
50) You expect to receive $5,400 2 years from now, $6,300 3 years from now, and $10,900 6 years
from now. What is the future value of these cash flows 7 years from now if the interest rate is 7.4
percent, compounded annually?
A) $25,916.78
B) $28,109.08
C) $27,805.20
D) $29,341.02
E) $25,889.39
51) Antonio is going to receive $25,000 today as an insurance settlement. In addition, he will
receive $12,000 1 year from today and $10,000 2 years from today. If he invests these funds, how
much will he have saved when he retires 32 years from now if he earns an average annual return of
6.7 percent?
A) $456,124.93
B) $461,414.14
C) $395,072.90
D) $407,008.77
E) $358,726.88
52) Beatrice is investing $5,000 in an account that pays 4 percent simple interest. How much more
could she have earned over a period of 10 years if the interest had compounded annually?
A) $414.79
B) $0
C) $385.65
D) $401.22
E) $390.70
53) What is the annual percentage rate on a loan with a stated rate of 2.109 percent per quarter?
A) 8.717%
B) 9.174%
C) 8.036%
D) 8.707%
E) 8.436%
54) What is the effective annual rate on a loan with an APR of 10.6 percent if interest is
compounded daily? Assume a 365-day year.
A) 10.08%
B) 11.02%
C) 10.72%
D) 10.16%
E) 11.18%
55) What is the effective annual rate if the APR is 5.25 percent, compounded semiannually?
A) 5.278%
B) 5.299%
C) 5.306%
D) 5.313%
E) 5.319%
56) What is the effective annual rate if the APR is 6.35 percent, compounded continuously?
A) 6.427%
B) 6.447%
C) 6.539%
D) 6.602%
E) 6.556%
57) You expect to receive $1,800 at the end of 5 years. What is the present value of this payment if
the interest rate is 7.12 percent, compounded continuously?
A) $1,271.64
B) $1,276.20
C) $1,269.41
D) $1,257.78
E) $1,260.85
58) You are paying an effective annual rate of 18.87 percent on your credit card. The interest is
compounded monthly. What is the annual percentage rate?
A) 18.50%
B) 17.41%
C) 17.79%
D) 17.91%
E) 18.31%
59) What is the effective annual rate if a firm charges you 7.75 percent, compounded daily, based
on a 360-day year?
A) 7.928%
B) 7.994%
C) 8.057%
D) 7.582%
E) 8.109%
60) Erickson's is considering a project with an initial cost of $623,000. The project will produce
cash inflows of $33,500 monthly for 21 months. What is the annual rate of return on this project?
A) 11.57%
B) 13.59%
C) 16.59%
D) 17.47%
E) 18.44%
61) An annuity costs $185,000 today and provides monthly payments of $950 for 40 years. The
first payment occurs 1 month from today. What annual rate of return does this annuity offer?
A) 5.33%
B) 5.47%
C) 5.16%
D) 4.79%
E) 4.56%
62) Your parents have been investing $25 a week for the past 18 years into an account for you.
Today, this investment account is worth $60,762.53. Interest is compounded weekly. What is the
annual rate of return?
A) 8.80%
B) 8.47%
C) 8.16%
D) 9.62%
E) 9.34%
63) Your credit card company quotes you a rate of 17.9 percent, compounded daily. What actual
rate of interest you are paying? Assume a 365-day year.
A) 18.97%
B) 19.81%
C) 18.48%
D) 19.60%
E) 18.79%
64) A bank is loaning $5,000 for 3 years at an interest rate of 7.5 percent. How much additional
interest can the bank earn if it compounds interest continuously rather than annually?
A) $61.65
B) $56.67
C) $51.78
D) $50.13
E) $48.89
65) East Coast Investors invested $28,000 a year into a project for the past 7 years. Today, the
project was sold for a net of $324,000. What is the rate of return, ignoring taxes?
A) 17.43%
B) 17.06%
C) 15.59%
D) 16.67%
E) 16.44%
66) An investment will pay $1,200 per quarter for 15 years. You require a return of 12 percent,
compounded quarterly, for this type of investment. How much is this investment worth to you
today?
A) $33,210.68
B) $28,409.08
C) $31,152.59
D) $28,395.10
E) $30,806.30
67) Angela expects to save $500 a year and earn an average annual return of 5.2 percent. How
much will her savings be worth 35 years from now?
A) $51,317.82
B) $57,702.57
C) $47,076.06
D) $44,868.92
E) $56,063.66
68) Jensen's Shipping wants to expand as soon as it can save $112 million. Towards that goal, the
firm started saving 3 years ago and currently has $38.2 million saved. Starting today, the firm will
add $15,000 a month to this savings account. The rate of return is 7.1 percent, compounded
monthly. How long will it be from now before the company can expand?
A) 14.60 years
B) 16.52 years
C) 15.67 years
D) 16.08 years
E) 15.39 years
34
69) Suzie just won the lottery! As her prize, she will receive $2,500 a month for 10 years. The first
payment will be paid today. At 6 percent, compounded monthly, what is this prize worth to her
today?
A) $224,647.53
B) $223,940.48
C) $224,953.46
D) $225,183.63
E) $226,309.55
70) Walt can afford monthly car payments of $140 for 3 years, starting 1 month from now. The
interest rate is 4.6 percent, compounded monthly. How much can he afford to borrow to buy a car?
A) $4,961.36
B) $4,717.32
C) $4,533.80
D) $5,333.88
E) $4,699.31
71) Rodget's is saving $2,500 a month, starting today, and continuing for 4 years. The firm expects
to earn 5.6 percent, compounded monthly. If the firm had wanted to deposit an equivalent lump
sum today, how much would it have had to deposit?
A) $107,286.58
B) $108,601.95
C) $105,330.60
D) $107,787.25
E) $108,998.01
72) You desperately need some money and only your "miserly" friend has any. He agrees to loan
you the money you need if you make payments of $25 a month for the next 6 months. In keeping
with his reputation, he requires that the first payment be paid today. He also charges you 1.65
percent interest per month. How much money are you borrowing?
A) $144.04
B) $140.98
C) $113.94
D) $141.70
E) $114.96
73) Theo just won a prize that will pay him $10,000 a year for 10 years, starting at the end of Year
10. What is the current value of this prize if the discount rate is 7 percent, compounded annually?
A) $37,982.98
B) $35,704.33
C) $38,203.63
D) $36,191.91
E) $35,928.70
