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39.
Theresa adds $1,500 to her savings account on the first day of each year.
Marcus adds $1,500 to his savings account on the last day of each year.
They both earn 6.5 percent annual interest. What is the difference in their
savings account balances at the end of 35 years?
40.
You are borrowing $17,800 to buy a car. The terms of the loan call for
monthly payments for 5 years at 8.6 percent interest. What is the amount of
each payment?
41.
You borrow $165,000 to buy a house. The mortgage rate is 4.5 percent and
the loan period is 30 years. Payments are made monthly. If you pay the
mortgage according to the loan agreement, how much total interest will you
pay?
42.
Holiday Tours (HT) has an employment contract with its newly hired CEO.
The contract requires a lump sum payment of $10.4 million be paid to the
CEO upon the successful completion of her first three years of service. HT
wants to set aside an equal amount of money at the end of each year to
cover this anticipated cash outflow and will earn 5.65 percent on the funds.
How much must HT set aside each year for this purpose?
43.
Nadine is retiring at age 62 and expects to live to age 85. On the day she
retires, she has $402,000 in her retirement savings account. She is
somewhat conservative with her money and expects to earn 6 percent
during her retirement years. How much can she withdraw from her
retirement savings each month if she plans to spend her last penny on the
morning of her death?
44.
Kingston Development Corp. purchased a piece of property for $2.79
million. The firm paid a down payment of 15 percent in cash and financed
the balance. The loan terms require monthly payments for 15 years at an
annual percentage rate of 7.75 percent, compounded monthly. What is the
amount of each mortgage payment?
45.
You estimate that you will owe $45,300 in student loans by the time you
graduate. The interest rate is 4.25 percent. If you want to have this debt
paid in full within ten years, how much must you pay each month?
46.
You are buying a previously owned car today at a price of $3,500. You are
paying $300 down in cash and financing the balance for 36 months at 8.5
percent. What is the amount of each loan payment?
47.
Atlas Insurance wants to sell you an annuity which will pay you $1,600 per
quarter for 25 years. You want to earn a minimum rate of return of 6.5
percent. What is the most you are willing to pay as a lump sum today to buy
this annuity?
48.
Your car dealer is willing to lease you a new car for $245 a month for 48
months. Payments are due on the first day of each month starting with the
day you sign the lease contract. If your cost of money is 6.5 percent, what is
the current value of the lease?
49.
Your great aunt left you an inheritance in the form of a trust. The trust
agreement states that you are to receive $2,400 on the first day of each
year, starting immediately and continuing for 20 years. What is the value of
this inheritance today if the applicable discount rate is 6.75 percent?
50.
You just received an insurance settlement offer related to an accident you
had six years ago. The offer gives you a choice of one of the following three
offers:
You can earn 7.5 percent on your investments. You do not care if you
personally receive the funds or if they are paid to your heirs should you die
within the settlement period. Which one of the following statements is
correct given this information?
51.
Samuelson Engines wants to save $750,000 to buy some new equipment
four years from now. The plan is to set aside an equal amount of money on
the first day of each quarter starting today. The firm can earn 4.75 percent
on its savings. How much does the firm have to save each quarter to
achieve its goal?
52.
Stephanie is going to contribute $300 on the first of each month, starting
today, to her retirement account. Her employer will provide a 50 percent
match. In other words, her employer will contribute 50 percent of the
amount Stephanie saves. If both Stephanie and her employer continue to do
this and she can earn a monthly rate of 0.90 percent, how much will she
have in her retirement account 35 years from now?
53.
You are considering an annuity which costs $160,000 today. The annuity
pays $17,500 a year at an annual interest rate of 7.50 percent. What is the
length of the annuity time period?
54.
Today, you borrowed $6,200 on your credit card to purchase some furniture.
The interest rate is 14.9 percent, compounded monthly. How long will it take
you to pay off this debt assuming that you do not charge anything else and
make regular monthly payments of $120?
55.
Meadow Brook Manor would like to buy some additional land and build a
new assisted living center. The anticipated total cost is $20.5 million. The
CEO of the firm is quite conservative and will only do this when the
company has sufficient funds to pay cash for the entire construction
project. Management has decided to save $1.2 million a quarter for this
purpose. The firm earns 6.25 percent, compounded quarterly, on the funds it
saves. How long does the company have to wait before expanding its
operations?
56.
Today, you are retiring. You have a total of $411,016 in your retirement
savings and have the funds invested such that you expect to earn an
average of 7.10 percent, compounded monthly, on this money throughout
your retirement years. You want to withdraw $2,500 at the beginning of
every month, starting today. How long will it be until you run out of money?
57.
Gene's Art Gallery is notoriously known as a slow-payer. The firm currently
needs to borrow $27,500 and only one company will even deal with them.
The terms of the loan call for daily payments of $100. The first payment is
due today. The interest rate is 24 percent, compounded daily. What is the
time period of this loan? Assume a 365 day year.
