1. All Constructions, Inc. is planning on constructing a new facility. The company plans to pay 20%

of the cost in cash and finance the balance. If the company can afford monthly payments of

$128,740 for 30 years and the prevailing interest rate on mortgages is 8% compounded monthly,

how much can the company spend (approximately) on the new facility?

Select one:

a. $30 million.

b. None of the above.

c. $20 million.

d. $21.9 million.

e. $26.8 million.

f. $24.2 million.

2. Assuming an annual interest rate of 8%, what is the future value of the following annual cash

flows at the end of four years from now? Year 0, CF0=-800; Year 1, CF1=100; Year 2, CF2=300;

Year 3, CF3=500; Year 4, CF4=700

Select one:

a. $627.50.

b. $721.08.

c. $574.82.

d. $676.20.

e. $686.77.

f. None of the above.

3. At a 10% annual rate of return you will triple your original investment in approximately ___

years.

Select one:

a. 8.

b. 12.

c. None of the above.

d. 24.

e. 19.

f. 18.

4.If you deposit $10,000 at the end of each six months into an account that earns interest at a

rate of 8% compounded semi-annually, how much will be in the account in five years?

Select one:

a. $33,998.29.

b. $28,331.91.

c. None of the above.

d. $22,034.60.

e. $28,991.87.

f. $120,061.07.

5. If you wish to accumulate $150,000 in 15 years, how much must you deposit today in an

account that pays an effective annual rate of 8%?

Select one:

a. $16,628.25.

b. $84,482.16.

c. $17,534.50.

d. $14,864.36.

e. $47,286.26.

f. None of the above.

6. Jeff invests $3,000 in an account that pays 9% simple interest. How much more could he have

earned over a 20-year period if the interest had compounded annually?

Select one:

a. $4,409.05.

b. $7,348.42.

c. None of the above.

d. $10,287.79.

e. $8,032.30.

f. $8,413.23.

7. Moe and Joe are twins. Moe invested $1,000, earned 9% annually, and now has $1,411.58. Joe

invested $1,000, earned 6.47%, and now has $1,992.97. Joe invested his money _____ years

before Moe.

Select one:

a. 7.

b. 3.

c. 1.

d. 9.

e. None of the above.

f. 4.

8. Ronald has a mortgage with a current balance owing of $150,000. He has 250 monthly

payments left to make, and his bank is charging interest at a rate of 7% compounded semiannually. Which of the following is the best estimate of Ronaldâs payments?

Select one:

a. $962.25.

b. $872.41.

c. $1,283.54.

d. None of the above.

e. $1,132.64.

f. $882.65.

9. What is the maximum you would be willing to pay for an annuity that provides an 8.25% rate

of return by paying $500 at the beginning of each year for 10 years? (Round to the nearest $1)

Select one:

a. None of the above.

b. $6,935.

c. $7,183.

d. $6,683.

e. $3,591.

f. $3,467.

10. Your cousin offers you a $10,000 loan and requires you to pay $10,100 at the end of the

month, what is the EAR on her loan to you?

Select one:

a. 34.49%.

b. 12.68%.

c. 79.59%.

d. 62.33%.

e. None of the above.

f. 213.84%.

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