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44) Assume you work for an employer who will contribute $60 a week for the next 20 years into
a retirement plan for your benefit. At a discount rate of 9 percent, what is this employee benefit
worth to you today?
A) $28,927.38
B) $27,618.46
C) $29,211.11
D) $25,306.16
E) $25,987.74
45) The Distribution Point plans to save $2,000 a month for the next 3 years for future
emergencies. The interest rate is 4.5 percent compounded monthly. The first monthly deposit
will be made today. What would today's deposit amount have to be if the firm opted for one
lump sum deposit that would yield the same amount of savings as the monthly deposits after 3
years?
A) $70,459.07
B) $67,485.97
C) $69,068.18
D) $69,333.33
E) $67,233.84
46) You need some money today and the only friend you have that has any is a miser. He agrees
to loan you the money you need, if you make payments of $30 a month for the next six months.
In keeping with his reputation, he requires that the first payment be paid today. He also charges
you 2 percent interest per month. How much total interest is he charging?
A) $4.50
B) $3.60
C) $9.50
D) $4.68
E) $8.60
47) Sue just purchased an annuity that will pay $24,000 a year for 25 years, starting today. What
was the purchase price if the discount rate is 8.5 percent?
A) $241,309
B) $245,621
C) $251,409
D) $258,319
E) $266,498
48) Marcus is scheduled to receive annual payments of $3,600 for each of the next 12 years. The
discount rate is 8 percent. What is the difference in the present value if these payments are paid
at the beginning of each year rather than at the end of each year?
A) $2,170.39
B) $2,511.07
C) $2,021.18
D) $2,027.94
E) $2,304.96
49) Two annuities have equal present values and an applicable discount rate of 7.25 percent. One
annuity pays $2,500 on the first day of each year for 15 years. How much does the second
annuity pay each year for 15 years if it pays at the end of each year?
A) $2,331.00
B) $2,266.67
C) $2,500.00
D) $2,390.50
E) $2,681.25
50) Trish receives $450 on the first of each month. Josh receives $450 on the last day of each
month. Both Trish and Josh will receive payments for next four years. At a discount rate of 9.5
percent, what is the difference in the present value of these two sets of payments?
A) $141.80
B) $151.06
C) $154.30
D) $159.08
E) $162.50
51) What is the future value of $1,575 a year for 25 years at 6.3 percent interest, compounded
annually?
A) $76,919.04
B) $72,545.78
C) $90,152.04
D) $92,006.08
E) $91,315.09
52) What is the future value of $8,500 a year for 40 years at 10.8 percent interest, compounded
annually?
A) $3,278,406.16
B) $4,681,062.12
C) $2,711,414.14
D) $3,989,476.67
E) $4,021,223.33
53) Rosina plans on saving $2,000 a year and expects to earn an annual rate of 6.9 percent. How
much will she have in her account at the end of 37 years?
A) $406,429.10
B) $338,369.09
C) $297,407.17
D) $313,274.38
E) $308,316.67
54) 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?
A) $12,093.38
B) $12,113.33
C) $12,127.04
D) $12,211.12
E) $12,219.46
55) You just obtained a loan of $16,700 with monthly payments for four years at 6.35 percent
interest, compounded monthly. What is the amount of each payment?
A) $387.71
B) $391.40
C) $401.12
D) $419.76
E) $394.89
56) You borrowed $185,000 for 30 years to buy a house. The interest rate is 4.35 percent,
compounded monthly. If you pay all of your monthly payments as agreed, how much total
interest will you pay on this mortgage? (Round the monthly payment to the nearest whole cent.)
A) $150,408
B) $147,027
C) $146,542
D) $154,319
E) $141,406
57) Travis International has a one-time expense of $1.13 million that must be paid two years
from today. The firm can earn 4.3 percent, compounded monthly, on its savings. How much
must the firm save each month to fund this expense if the firm starts investing equal amounts
each month starting at the end of this month?
A) $38,416.20
B) $45,172.02
C) $51,300.05
D) $47,411.08
E) $53,901.15
58) Nadine is retiring today and has $96,000 in her retirement savings. She expects to earn 5.5
percent, compounded monthly. How much can she withdraw from her retirement savings each
month if she plans to spend her last penny 18 years from now?
A) $809.92
B) $847.78
C) $919.46
D) $616.08
E) $701.10
59) Island News purchased a piece of property for $1.79 million. The firm paid a down payment
of 20 percent in cash and financed the balance. The loan terms require monthly payments for 20
years at an APR of 4.75 percent, compounded monthly. What is the amount of each mortgage
payment?
A) $9,253.92
B) $10,419.97
C) $8,607.11
D) $11,567.40
E) $12,301.16
60) You estimate that you will owe $40,200 in student loans by the time you graduate. If you
want to have this debt paid in full within 10 years, how much must you pay each month if the
interest rate is 4.35 percent, compounded monthly?
A) $411.09
B) $413.73
C) $414.28
D) $436.05
E) $442.50
61) Phil purchased a car today at a price of $8,500. He paid $300 down in cash and financed the
balance for 36 months at 5.75 percent, compounded monthly. What is the amount of each
monthly loan payment?
A) $248.53
B) $270.23
C) $318.47
D) $305.37
E) $257.62
62) An insurance annuity offers to pay you $1,000 per quarter for 20 years. If you want to earn a
rate of return of 6.5 percent, compounded quarterly, what is the most you are willing to pay as a
lump sum today to obtain this annuity?
A) $32,008.24
B) $34,208.16
C) $44,591.11
D) $43,008.80
E) $38,927.59
63) Your car dealer is willing to lease you a new car for $190 a month for 36 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?
A) $10,331.03
B) $6,232.80
C) $9,197.74
D) $7,203.14
E) $11,008.31
64) Your great aunt left you an inheritance in the form of a trust. The trust agreement states that
you are to receive $2,500 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 4.75
percent?
A) $24,890.88
B) $31,311.16
C) $33,338.44
D) $28,909.29
E) $29,333.33
65) Chris has three options for settling an insurance claim. Option A will provide $1,500 a month
for 6 years. Option B will pay $1,025 a month for 10 years. Option C offers $85,000 as a lump
sum payment today. The applicable discount rate is 6.8 percent, compounded monthly. Which
option should Chris select, and why, if he is only concerned with the financial aspects of the
offers?
A) Option A: It provides the largest monthly payment.
B) Option B: It pays the largest total amount.
C) Option C: It is all paid today.
D) Option B: It pays the greatest number of payments.
E) Option B: It has the largest value today.
66) Racing Motors wants to save $825,000 to buy some new equipment three years from now.
The plan is to set aside an equal amount of money on the first day of each quarter starting today.
How much does the company need to save each quarter to achieve its goal if it can earn 4.45
percent on its savings?
A) $63,932.91
B) $62,969.70
C) $63,192.05
D) $62,925.00
E) $64,644.17
67) Stephanie is going to contribute $160 on the first of each month, starting today, to her
retirement account. Her employer will provide a match of 50 percent. In other words, her
employer will add $80 to the amount Stephanie saves. If both Stephanie and her employer
continue to do this and she can earn a monthly interest rate of .45 percent, how much will she
have in her retirement account 35 years from now?
A) $336,264.14
B) $204,286.67
C) $199,312.04
D) $268,418.78
E) $299,547.97
68) An annuity that pays $12,500 a year at an annual interest rate of 5.45 percent costs $150,000
today. What is the length of the annuity time period?
A) 25 years
B) 18 years
C) 15 years
D) 20 years
E) 22 years
69) You want to be a millionaire when you retire in 30 years and expect to earn 8.5 percent,
compounded monthly. How much more will you have to save each month if you wait 10 years to
start saving versus if you start saving at the end of this month?
A) $947.22
B) $1,046.80
C) $808.47
D) $841.15
E) $989.10
70) You are the recipient of a gift that will pay you $25,000 one year from now and every year
thereafter for the following 24 years. The payments will increase in value by 2.5 percent each
year. If the appropriate discount rate is 8.5 percent, what is the present value of this gift?
A) $416,667
B) $316,172
C) $409,613
D) $311,406
E) $386,101
71) You are preparing to make monthly payments of $100, beginning at the end of this month,
into an account that pays 5 percent interest, compounded monthly. How many payments will you
have made when your account balance reaches $10,000?
A) 97.30
B) 83.77
C) 89.46
D) 100.00
E) 91.12
72) You want to borrow $27,500 and can afford monthly payments of $650 for 48 months, but
no more. Assume monthly compounding. What is the highest APR rate you can afford?
A) 6.33 percent
B) 6.67 percent
C) 5.82 percent
D) 7.01 percent
E) 7.18 percent
73) Today, you borrowed $3,200 on a credit card that charges an interest rate of 12.9 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 $60?
A) 6.87 years
B) 6.28 years
C) 6.64 years
D) 7.23 years
E) 7.31 years
74) The Rodriquez family is determined to purchase a $250,000 home without incurring any
debt. The family plans to save $2,500 a quarter for this purpose and expects to earn 6.65 percent,
compounded quarterly. How long will it be until the family can purchase a home?
A) 23.09 years
B) 14.85 years
C) 35.46 years
D) 48.82 years
E) 59.39 years
75) Today, you are retiring. You have a total of $289,416 in your retirement savings. You want
to withdraw $2,500 at the beginning of every month, starting today and expect to earn 4.6
percent, compounded monthly. How long will it be until you run out of money?
A) 29.97 years
B) 8.56 years
C) 22.03 years
D) 12.71 years
E) 18.99 years
76) The Art Gallery is notoriously known as a slow-payer. The firm currently needs to borrow
$25,000 and only one company will loan to them. The terms of the loan call for weekly
payments of $500 at a weekly interest rate of .45%. What is the loan term?
A) 42.5 weeks
B) 45.00 weeks
C) 56.77 weeks
D) 50.11 weeks
E) 43.33 weeks
77) Jogging Gear is considering a project with an initial cash requirement of $238,400. The
project will yield cash flows of $4,930 monthly for 65 months. What is the rate of return on this
project?
A) 9.97 percent
B) 11.38 percent
C) 14.28 percent
D) 13.41 percent
E) 10.56 percent
78) Your insurance agent is trying to sell you an annuity that costs $50,000 today. By buying this
annuity, your agent promises that you will receive payments of $250 a month for the next 20
years. What is the rate of return on this investment?
A) 3.75 percent
B) 2.47 percent
C) 1.88 percent
D) 2.45 percent
E) 3.67 percent
79) You have been investing $300 a month for the last 8 years. Today, your investment account
is worth $43,262. What is your average rate of return on your investments?
A) 9.69 percent
B) 7.23 percent
C) 9.36 percent
D) 8.41 percent
E) 7.78 percent
80) You have been purchasing $12,000 worth of stock annually for the past eight years and now
have a portfolio valued at $87,881. What is your annual rate of return?
A) 4.32 percent
B) 2.54 percent
C) 3.29 percent
D) − 4.32 percent
E) − 2.54 percent
81) Your father helped you start saving $25 a month beginning on your fifth birthday. He always
made you deposit the money into your savings account on the first day of each month just to
"start the month out right." Today completes your 15th year of saving and you now have
$6,528.91 in this account. What is the rate of return on your savings?
A) 4.67 percent
B) 5.30 percent
C) 5.87 percent
D) 4.98 percent
E) 6.12 percent
