Multiple Choice- Annuities ________________________________________ Solution The future value of a lump sum at the end of five years is $1,000. The nominal interest rate is 10 percent and interest is compounded semiannually. Which of the following statements is most correct? d. Both statements b and c are correct. e.
The future value of a lump sum at the end of five years is $1,000. The nominal interest rate is 10 percent and interest is compounded semiannually. Which of the following statements is most correct? a. The present value of the $1,000 is greater if interest is compounded monthly rather than semiannually. b. The effective a
1. If you borrow $15,618 and are required to pay the loan back in 7 equal annual installments of $300. What is the interest rate assocated with this loan? 2. Your rich uncle has offered you a choice of one of the three following alternatives. Which one would you take? a) $10,000 now b) $2000 a year for 8 years -equal inv
1. The future value of a $500 ordinary annuity received for three years is $________, assuming an investment rate of 10%. a. 1,655.00 b. 665.50 c. 1,820.50 d. 335.65 2. With an interest rate of 9 percent, your investment would double in about a. 4 years. b. 6 years. c. 8 years. d. 10 years. 3. An ordinary annuity
What is the effective return of an investment account that pays a 9.9 APR compounded daily (for 365 days)? Okay let's say the annual interest rate is 10%. a.) What would be the present value of a 5-year ordinary annuity with annual payments of $200? b.)What is the present value if it is a 5-year annuity due (all the rest is
1. Determine the future value of an annuity that pays $5,000 at the end of the next 11 years. Similar securities pay an interest rate of 7%. 2. How much money would you be willing to pay in order to receive $800,000 40 years from today? Assume that your required rate of return on investments is 8% compounded semiannually.
1. Today you borrow $80,000 to finance the purchase of your new sports car. Interest will be 5% compounded monthly. Payments will be made at the beginning of the month. You will repay the loan over 4 years. How much will the payments be? 2 If you borrow $100 and pay back $3600 in 5 years, what annual interest rate are you pay
You plan to retire in twenty years. When you retire, you will need $150,000 per year for thirty years with the first payment needed at t=21. You expect to receive $50,000 from a trust at t=12 which you will deposit in your retirement account. At t=10, you plan to take a world cruise that will cost you $15,000 to be paid out o
You plan to take a long trip through Europe, leaving in 5 years. You're plan is to save money for the next five years, leave at the end of the fifth year, and then survive on your savings for 3 years. You estimate you can survive in Europe on $10,000 a year. You estimate that your investment account will earn 8% forever. You
Your client plans to contribute an equal amount of money each year until her retirement. Her first contribution will come in exactly 1 year; her 10th and final contribution will come in 10 years (on her 85th birthday). How much should she contribute each year to meet her objectives?
Your client just turned 75 years old and plans on retiring in exactly 10 years (on her 85th birthday). She is saving money today for her retirement and is establishing a retirement account with your office. She would like to withdraw money from her retirement account on her birthday each year until her death. She would ideall
1. Which of the following should be used to calculate the amount of the equal periodic payments that could be equivalent to an outlay of $3000 at the time of the last payment? a) Amount of 1 b) Amount of an annuity of 1 c) Present value of an annuity of 1 d) Present value of 1 (Please give reason for answer)
1. Assume the current (4) year cost to attend Park University for tuition and books is $12,500. It is estimated that these costs will grow at a 7% annual rate. 2. The money that you annual set aside to meet this financial obligation is expected to earn an estimated 5% annually for the 7-year period (period from age 10 t
Assume you now have a child and you are planning for her college education. You would like to make monthly deposits over the next 21 years (first payment to be made one month from today) with the final payments to be made at her 21st birthday(a total of 252 deposits) so that you will be able to cover her expected expenses while
12. Your baby girl, Jessica, was born yesterday!! You have made a decision that you need to start a savings program to fund that future college education. After speaking with members of your finance class you decide to save $150 a month for the next 18 years. You feel you can get 8% average return on the savings over the 18 year
Discussion Question 1: Many people, as evidenced by the large payoffs provided for picking 6 out of 53 (or more) numbers, play the lottery. The big choice the winners face: taking a lump sum payment today or an annual payment over 20 years. Is a dollar today worth more than a dollar tomorrow? Why or why not? Which do you prefer
1) Terry Austin is 30 years old and is saving for her retirement. She is planning on making 36 contributions to her retirement account at the beginning of each of the next 36 years. The first contribution will be made today (t = 0) and the final contribution will be made 35 years from today (t = 35). The retirement account will
BE2-27 Kilarny Company is considering investing in an annuity contract that will return $20,000 annually at the end of each year for 15 years. What amount should Kilarny Company pay for this investment if it earns a 6% return?
Unless stated otherwise, interest is compounded annually and payments are at the end of the year. Explanations should be brief (1 or 2 sentences). 1. Jana, who just turned 55, would like to have an annual annuity of $25,000 paid each year for 15 years, the first payment occurring on her 66th birthday. How much must Jana sa
1. Compounding frequency and future value You plan to invest $2,000 in an individual retirement account (IRA) today at a nominal rate of 8 percent, which is expected to apply to all future years. a. How much will you have in the account after 10 years if the interest is compounded: 1. Annually 2. Semi-Annually 3. Daily
What will the monthly payment be if you take out a $100,000 15 year mortgage at an interest rate of 1% per month?
In May 1992, a 60 yr old nurse gambled $12 in a Reno casino and walked away with the biggest jackpot in history - $9.3 million. In reality, the jackpot wasn't really worth $9.3 million. The sum was to be paid in 20 annual installments of $465,000 each. What is the present value of the jackpot?
A) Calculate the monthly repayments on a $20,000 loan if interest rates are 12% p.a. compounded monthly, and it is to be repaid in equal instalments over 2.5 years. b) What balance is outstanding immediately after the 18th payment is made?
Determine what payments are required to repay a $100,000 loan over 20 years in equal monthly installments if interest rates remain at 9% p.a. (compounded monthly)
Blue Grass Life insurance is trying to sell you an investment policy that will pay you and your heirs $10,000 per year forever. If the required return on this investment is 12%, how much will you pay for the policy?