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Time Value of Money

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1. Hayley makes annual end-of-year payments of $6,260.96 on a five-year loan with an 8 percent interest rate. The original principal amount was

1. $25,000.
2. $30,000.
3. $31,000.
4. $20,000.

2.Nico makes annual end-of-year payments of $5,043.71 on a four-year loan with an interest rate of 13 percent. The original principal amount was

1. $24,462.
2. $20,175.
3. $ 3,092.
4. $15,000.

3.If a United States Savings bond can be purchased for $29.50 and has a maturity value at the end of 25 years of $100, what is the annual rate of return on the bond?

1. 5 percent
2. 6 percent
3. 8 percent
4. 7 percent

4.The present value of a $25,000 perpetuity at a 14 percent discount rate is

1. $350,000.
2. $219,298.
3. $285,000.
4. $178,571.

5.Jia borrows $50,000 at 10 percent annually compounded interest to be repaid in four equal annual installments. The actual end-of-year loan payment is

1. $10,774.
2. $15,773.
3. $14,340.
4. $12,500.

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The solution explains some multiple choice questions relating to time value of money

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