77.
Lucas will receive $7,100, $8,700, and $12,500 each year starting at the end
of year one. What is the future value of these cash flows at the end of year
five if the interest rate is 9 percent?
78.
You plan on saving $5,200 this year, nothing next year, and $7,500 the
following year. You will deposit these amounts into your investment account
at the end of each year. What will your investment account be worth at the
end of year three if you can earn 8.5 percent on your funds?
79.
Miley expects to receive the following payments: Year 1 = $50,000; Year 2 =
$28,000; Year 3 = $12,000. All of this money will be saved for her
retirement. If she can earn an average of 10.5 percent on her investments,
how much will she have in her account 25 years after making her first
deposit?
80.
Blackwell, Inc. has a $75,000 liability it must pay three years from today.
The company is opening a savings account so that the entire amount will be
available when this debt needs to be paid. The plan is to make an initial
deposit today and then deposit an additional $15,000 each year for the next
three years, starting one year from today. The account pays a 4.5 percent
rate of return. How much does the firm need to deposit today?
81.
The government has imposed a fine on the Corner Tavern. The fine calls for
annual payments of $125,000, $100,000, $75,000, and $50,000, respectively,
over the next four years. The first payment is due one year from today. The
government plans to invest the funds until the final payment is collected
and then donate the entire amount, including the investment earnings, to
help the local community shelter. The government will earn 5.5 percent on
the funds held. How much will the community shelter receive four years
from today?
82.
Wicker Imports established a trust fund that provides $90,000 in
scholarships each year for needy students. The trust fund earns a fixed 6
percent rate of return. How much money did the firm contribute to the fund
assuming that only the interest income is distributed?
83.
A preferred stock pays an annual dividend of $3.20. What is one share of
this stock worth today if the rate of return is 11.75 percent?
84.
You would like to establish a trust fund that will provide $120,000 a year
forever for your heirs. The trust fund is going to be invested very
conservatively so the expected rate of return is only 5.75 percent. How
much money must you deposit today to fund this gift for your heirs?
85.
You just paid $750,000 for an annuity that will pay you and your heirs
$42,000 a year forever. What rate of return are you earning on this policy?
86.
You grandfather won a lottery years ago. The value of his winnings at the
time was $50,000. He invested this money such that it will provide annual
payments of $2,400 a year to his heirs forever. What is the rate of return?
87.
The preferred stock of Casco has a 6.25 percent dividend yield. The stock is
currently priced at $59.30 per share. What is the amount of the annual
dividend?
88.
Your credit card company charges you 1.65 percent interest per month.
What is the annual percentage rate on your account?
89.
What is the annual percentage rate on a loan with a stated rate of 2.75
percent per quarter?
90.
You are paying an effective annual rate of 18.974 percent on your credit
card. The interest is compounded monthly. What is the annual percentage
rate on this account?
91.
What is the effective annual rate if a bank charges you 8.25 percent
compounded quarterly?
92.
Your credit card company quotes you a rate of 17.9 percent. Interest is
billed monthly. What is the actual rate of interest you are paying?
93.
The Pawn Shop loans money at an annual rate of 23 percent and
compounds interest weekly. What is the actual rate being charged on these
loans?
94.
You are considering two loans. The terms of the two loans are equivalent
with the exception of the interest rates. Loan A offers a rate of 7.75 percent,
compounded daily. Loan B offers a rate of 8 percent, compounded semi-
annually. Which loan should you select and why?
95.
You have $5,600 that you want to use to open a savings account. There are
five banks located in your area. The rates paid by banks A through E,
respectively, are given below. Which bank should you select if your goal is
to maximize your interest income?
96.
What is the effective annual rate of 14.9 percent compounded
continuously?