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110. You win $1,000 today, which happens to be your 20th birthday. You decide to deposit this
money in an account and plan to add $1,000 to it each year on your birthday beginning one year
from today. If you earn 10 percent per year in the account, how long will it take to grow to
$750,000?
111. Your 30-year $95,000 mortgage calls for payments to be made at the end of each month.
The loan has a 5.85 percent annual interest rate. What is the remaining balance after five years?
112. Due to poor spending habits, Ricky has accumulated $10,000 in credit card debt. He has
missed several payments and now the annual interest rate on the card is 18.95 percent! If he
pays $175 per month on the card, how long will it take Ricky to pay off the card?
113. Due to poor spending habits, Ricky has accumulated $10,000 in credit card debt. He has
missed several payments and now the annual interest rate on the card is 18.95 percent! If he
pays $175 per month on the card, in total, how much interest expense does Ricky pay to the
credit card company?
25987.5 - 10000 = 15987.5
114. Due to poor spending habits, Ricky has accumulated $5,000 in credit card debt. He has
missed several payments and now the annual interest rate on the card is 16.75 percent! If he
pays $200 per month on the card, in total, how much interest expense does Ricky pay to the
credit card company?
115. You deposit $1,000 today and want to save $100 each month beginning one month from
today. Your account earns a 5 percent annual interest rate. How long will it take you to
accumulate $5,000?
116. You are deciding among several different bank accounts. Which of the following will
generate the highest effective annual rate (EAR)?
117. You are deciding among several different bank accounts. Which of the following will
generate the highest effective annual rate (EAR)?
118. Which of the following will increase the present value of an annuity?
119. Which of the following will decrease the present value of an annuity?
120. Which of the following statements is correct?
121. You just bought a new home and have a 30-year mortgage with monthly payments. Which
statement regarding your mortgage is correct?
122. Bank A charges a 7.75 percent annual percentage rate and interest is due at the end of
the year. Bank B charges a 7 percent annual percentage rate and interest must be paid monthly.
What is the effective annual rate charged by each bank?
123. Bank A charges a 7.50 percent annual percentage rate and interest is due at the end of
the year. Bank B charges a 6.95 percent annual percentage rate and interest must be paid
monthly. What is the effective annual rate charged by each bank?
124. Your company borrows $55,000 today to fund its growth initiatives. It must repay the
bank in four annual payments of $17,100 at the end of each year. What annual interest rate is
your firm paying?
125. Your company borrows $75,000 today to fund its growth initiatives. It must repay the
bank in four annual payments of $26,600 at the end of each year. What annual interest rate is
your firm paying?
126. Your company borrows $275,000 today to fund its growth initiatives. It must repay the
bank in five annual payments of $76,300 at the end of each year. What annual interest rate is
your firm paying?
127. As a college student, you probably receive many credit card offers in the mail. Consider
these two offers. The first card charges a 17 percent APR. An examination of the footnotes
reveals that this card compounds monthly. The second credit card charges 16.25 percent APR
and compounds weekly. What is the effective annual rate of the cheaper card?
128. As a college student, you probably receive many credit card offers in the mail. Consider
these two offers. The first card charges a 17 percent APR. An examination of the footnotes
reveals that this card compounds daily (365 day year). The second credit card charges 18 percent
APR and compounds semiannually. What is the effective annual rate of the cheaper card?
129. You have reviewed your budget and determine that the most you can afford on a car loan
is $375 per month. What is the most you can borrow if interest rates are 8 percent and you can
pay the loan over five years?
130. You have reviewed your budget and determine that the most you can afford on a car loan
is $455 per month. What is the most you can borrow if interest rates are 7 percent and you can
pay the loan over four years?
131. You have reviewed your budget and determine that the most you can afford on a car loan
is $550 per month. What is the most you can borrow if interest rates are 6 percent and you can
pay the loan over three years?
