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82) Today, you turn 21. Your birthday wish is that you will be a millionaire by your 40th
birthday. In an attempt to reach this goal, you decide to save $75 a day, every day, until you turn
40. You open an investment account and deposit your first $75 today. What rate of return must
you earn to achieve your goal? Note: Ignore Leap Years.
A) 7.67 percent
B) 6.27 percent
C) 9.20 percent
D) 7.06 percent
E) 8.54 percent
83) You just settled an insurance claim that calls for increasing payments over a 10-year period.
The first payment will be paid one year from now in the amount of $5,000. The following
payments will increase by 3.5 percent annually. What is the value of this settlement to you today
if you can earn 6.5 percent on your investments?
A) $42,023.05
B) $36,408.28
C) $34,141.14
D) $41,422.89
E) $38,008.16
84) Your grandfather left you an inheritance that will provide an annual income for the next 20
years. You will receive the first payment one year from now in the amount of $2,500. Every year
after that, the payment amount will increase by 5 percent. What is your inheritance worth to you
today if you can earn 7.5 percent on your investments?
A) $37,537.88
B) $28,667.40
C) $23,211.00
D) $35,612.20
E) $30,974.92
85) You just won the magazine sweepstakes and opted to take unending payments. The first
payment will be $50,000 and will be paid one year from today. Every year thereafter, the
payments will increase by 2.5 percent annually. What is the present value of your prize at a
discount rate of 7.9 percent?
A) $1,350,000.00
B) $1,348,409.50
C) $925,925.93
D) $891,006.67
E) $846,918.22
86) You want to buy a new sports car for $55,000. The contract is in the form of a 60-month
annuity due at an APR of 5.6 percent, compounded monthly. What will be your monthly
payment?
A) $1,047.90
B) $1,053.87
C) $1,048.21
D) $1,063.30
E) $1,072.11
87) A one-time gift to your college will provide $25,000 in scholarship funds next year with that
amount increasing by 2 percent annually thereafter. If the discount rate is 5.5 percent, what is the
current value of this perpetual gift?
A) $777,777.78
B) $748,602.49
C) $726,849.29
D) $714,285.71
E) $725,000.00
88) For the next 20 years, you plan to invest $600 a month in a stock account earning 7 percent
and $400 a month in a bond account earning 4 percent. When you retire in 20 years, you will
combine your money into an account with a return of 5 percent. How much can you withdraw
each month during retirement assuming a 30-year withdrawal period?
A) $2,636.19
B) $2,904.11
C) $3,008.21
D) $2,465.44
E) $3,206.97
89) Jones Stoneware has a liability of $75,000 due four years from today. The company is
planning to make an initial deposit today into a savings account and then deposit an additional
$10,000 at the end of each of the next four years. The account pays interest of 4.5 percent. How
much does the firm need to deposit today for its savings to be sufficient to pay this debt?
A) $28,299.95
B) $19,469.64
C) $21,400.33
D) $27,016.84
E) $22,218.09
90) What is the present value of $1,400 a year at a discount rate of 8 percent if the first payment
is received 7 years from now and you receive a total of 25 annual payments?
A) $9,417.69
B) $9,238.87
C) $9,333.33
D) $9,420.12
E) $9,881.72
91) Sara wants to establish a trust fund to provide $75,000 in scholarships each year and earn a
fixed 6.15 percent rate of return. How much money must she contribute to the fund assuming
that only the interest income is distributed?
A) $987,450
B) $1,478,023
C) $1,333,333
D) $1,219,512
E) $1,500,000
92) A preferred stock pays an annual dividend of $5.20. What is one share of this stock worth
today if the rate of return is 10.44 percent?
A) $51.48
B) $41.18
C) $49.81
D) $39.87
E) $42.90
93) You would like to provide $125,000 a year forever for your heirs. How much money must
you deposit today to fund this goal if you can earn a guaranteed 4.5 percent rate of return?
A) $2,777,778
B) $2,521,212
C) $2,666,667
D) $2,858,122
E) $2,850,000
94) You just paid $480,000 for an annuity that will pay you and your heirs $15,000 a year
forever. What rate of return are you earning on this policy?
A) 3.650 percent
B) 3.100 percent
C) 2.875 percent
D) 3.125 percent
E) 4.255 percent
95) Beginning three months from now, you will need $1,500 each quarter for the next four years
to cover expenses. How much do you need to have saved today to meet these needs if you can
earn .35 percent interest per quarter?
A) $23,300.75
B) $26,847.15
C) $21,068.00
D) $22,319.54
E) $26,069.79
96) You grandfather invested $16,600 years ago to provide annual payments of $700 a year to
his heirs forever. What is the rate of return?
A) 3.65 percent
B) 4.22 percent
C) 4.10 percent
D) 4.25 percent
E) 4.33 percent
97) DLM preferred stock has a dividend yield of 5.2 percent. The stock is currently priced at
$43.40 per share. What is the amount of the annual dividend?
A) $2.33
B) $2.07
C) $2.40
D) $2.26
E) $1.98
98) You just received an offer in the mail to transfer the $5,000 balance from your current credit
card, which charges an annual rate of 18.7 percent, to a new credit card charging a rate of 7.9
percent. You plan to make payments of $250 a month on this debt. How many fewer payments
will you have to make to pay off this debt if you transfer the balance to the new card?
A) 2.48 payments
B) 2.63 payments
C) 3.10 payments
D) 2.79 payments
E) 2.86 payments
99) Western Bank offers you a $12,000, 6-year term loan at 7 percent annual interest. What is the
amount of your annual loan payment?
A) $2,483.33
B) $2,517.55
C) $2,066.67
D) $1,901.18
E) $1,811.07
100) Your credit card company charges you 1.15 percent interest per month. What is the APR?
A) 18.92 percent
B) 13.80 percent
C) 15.95 percent
D) 17.25 percent
E) 14.71 percent
101) What is the APR on a loan with a stated rate of 2.35 percent per quarter?
A) 9.40 percent
B) 8.69 percent
C) 8.38 percent
D) 8.90 percent
E) 9.74 percent
102) You are paying an EAR of 16.78 percent on your credit card. The interest is compounded
monthly. What is the annual percentage rate on this account?
A) 15.61 percent
B) 13.97 percent
C) 14.98 percent
D) 15.75 percent
E) 16.35 percent
103) What is the EAR if a bank charges you an APR of 7.65 percent, compounded quarterly?
A) 7.91 percent
B) 8.38 percent
C) 8.02 percent
D) 7.87 percent
E) 8.11 percent
