FIN 5080 WEEK 4 PRACTICE

QUESTION 1

If the effective rate is 17%. What is the nominal rate if compounding is daily.  Do not enter the symbol % in your answer. Simply enter the answer in percentages rounded off to two decimal points.

 

QUESTION 2

How many months it will take to grow your money from $3,769 to $7,149 if you can earn an interest of 7% compounded monthly? Note: Do not write “months” in your answer. Simply write the number in the answer box.

 

QUESTION 3

Gertrude Carter and Co. has an outstanding loan that calls for equal annual payments of $14,903 over the 10-year life of the loan. The original loan amount was $100,000 at an APR of 8 percent. How much of the third payment is interest?

Do not enter the symbol $ in your answer. Simply enter the answer rounded off to two decimal points.

 

QUESTION 4

What should you be willing to pay in order to receive $947 annually forever, if you require 6% per year on the investment?

Just enter the number up to 2 decimal points. Do not enter $ in the answer box.

 

QUESTION 5

How many years it will take to grow your money from $4,324 to $8,358 if you can earn an interest of 7% compounded quarterly? Note: Do not write “years” in your answer. Simply write the number in the answer box.

 

QUESTION 6

027:

Say, you deposit $4,381 in a bank for 19 years. What is the amount you will have in the bank at the end of 19 years if interest of 6 % compounded monthly for first 5 years and interest of 9 % compounded quarterly for the remaining years? Note: Do not put $ sign in your answer. Simply write the number in the answer box.

 

QUESTION 7

How many years it will take you to quadruple (means 4 times) your money if you can earn 3.9% each year? Note: Do not write “years” in your answer. Simply write the number in the answer box.

 

 

 

 

QUESTION 8

The ABC Company is considering a new project which will require an initial cash investment of $5,474. The project will produce no cash flows for the first 5 years. The projected cash flows for years 6 through 9 are $3,514, $3,809, $2,905, and $5,345, respectively. If the appropriate discount rate is 13%, compute the NPV of the project.

Enter your answer rounded off to two decimal points. Do not enter $ in the answer box.

 

QUESTION 9

How much do you need to invest today in order to have $5,384 at the end of 22 years if you are sure to earn an interest at the rate of 11%, if interest is compounded quarterly? Note: Do not put $ sign in your answer. Simply write the number in the answer box.

 

QUESTION 10

Consider a 10-year loan with monthly payments at 10%. If the loan amount is $250,000, compute the Interest paid during the 6th year.

Enter your answer rounded off to two decimal points. Do not enter $ in the answer box.

 

QUESTION 11

The Perpetual Life Insurance Co is trying to sell you an investment policy that will pay you and your heirs $10,113 per year forever. Suppose the Perpetual Life Insurance Co. told you the policy costs $179,869. At what interest rate would this be a fair deal? Just enter the number in percentages up to 2 decimal points. Do not enter % in the answer box.

 

QUESTION 12

In order to buy a house, you take a loan of 100,000 at 7.5% for a period of 13 years. Compute the balance remaining at the end of 5 years.

Do not enter the symbol $ in your answer. Enter your answer as a positive number. Simply enter the answer rounded off to two decimal points.

 

QUESTION 13

If you receive $321 at the end of each year for the first three years and $692 at the end of each year for the next three years. What is the present value? Assume interest rate is 11%.

Hint: This is an uneven cash flow problem. Use the CF function and solve for NPV to get the answer.

Just enter the number up to 2 decimal points. Do not enter $ in the answer box.

 

QUESTION 14

Assume interest rate of 8%. A company receives cash flows of $96,921 at the end of years 4, 5, 6, 7, and 8, and cash flows of $277,114 at the end of year 10. Compute the future value of this cash flow stream.

Do not enter the symbol $ in your answer. Simply enter the answer rounded off to two decimal points.

 

QUESTION 15

If you can triple your money in 24 years, what is the implied rate of interest? Note: Do not put % sign in your answer. Simply write the number in percentages in the answer box.

 

QUESTION 16

Today, you are purchasing a $1,304 3-year car loan at 11 percent. You will pay annually at the end of each year. What is the amount of each payment?

 

QUESTION 17

Assume interest rate of 8%. A company receives cash flows of $542 at the end of year 5, $275 at the end of year 7, and $691 at the end of year 10. Compute the future value of this cash flow stream.

Do not enter the symbol $ in your answer. Simply enter the answer rounded off to two decimal points.

 

QUESTION 18

Kelly starting setting aside funds 7 years ago to buy some new equipment for her firm. She has saved $1,888 each quarter and earned an average rate of return of 3 percent. How much money does she currently have saved for this purpose?

 

QUESTION 19

How many years it will take to grow your money from $4,134 to $6,678 if you can earn an interest of 20% compounded monthly? Note: Do not write “years” in your answer. Simply write the number in the answer box.

 

QUESTION 20

What is the future value of $4,515 invested for 18 years at 19% if interest is compounded semi-annually? Note: Do not put $ sign in your answer. Simply write the number in the answer box.

 

QUESTION 21

Barrett Pharmaceuticals is considering a drug project that costs $191,892 today and is expected to generate end-of-year annual cash flows of $10,224, forever. At what discount rate would Barrett be indifferent between accepting and rejecting the project?

Just enter the number in percentages up to 2 decimal points. Do not enter % in the answer box.

 

QUESTION 22

How much do you need to invest today in order to have $10,016 at the end of 13 years if you are sure to earn an interest at the rate of 4%? Note: Do not put $ sign in your answer. Simply write the number in the answer box.

 

QUESTION 23

Assume interest rate of 8%. Suppose that you receive $107,238 at the end of each year for 4 years. Suppose that this cash flow starts at the end of the fourth year. Compute the present value.

Do not enter the symbol $ in your answer. Simply enter the answer rounded off to two decimal points.

 

QUESTION 24

What is the future value of $13,515 for 9 years at 9 percent if interest is compounded semi-annually? Note: Do not enter “$” in your answer. Simply write down the number that you get as your answer.

 

QUESTION 25

Say, you deposit $2,808 in a bank for 16 years. What is the amount you will have in the bank at the end of 16 years if interest of 6 % for first 7 years and interest of 9 % for the remaining years? Note: Do not put $ sign in your answer. Simply write the number in the answer box.

 

QUESTION 26

What is the future value of $535 invested for 13 years at 8% if interest is compounded semi-annually (twice a year)? Note: Do not put $ sign in your answer. Simply write the number in the answer box.

 

QUESTION 27

What is the future value of quarterly payments of $947 for 10 years at 7 percent?

 

QUESTION 28

The ABC Company is considering a new project which will require an initial cash investment of $17,429. The projected cash flows for years 1 through 4 are $6,228, $7,718, $9,087, and $4,328, respectively. If the appropriate discount rate is 3%, compute the NPV of the project.

Enter your answer rounded off to two decimal points. Do not enter $ in the answer box.

 

QUESTION 29

What is the future value of $2,772 invested for 14 years at 8% if interest is compounded quarterly? Note: Do not put $ sign in your answer. Simply write the number in the answer box.

 

QUESTION 30

What is the effective rate of 15% compounded monthly?

Do not enter the symbol % in your answer. Simply enter the answer in percentages rounded off to two decimal points.

 

QUESTION 31

How many years it will take you to double your money if you can earn 16% each year, given that compounding is quarterly? Note: Do not write “years” in your answer. Simply write the number in the answer box.

 

QUESTION 32

If you can double your money in 8 years, what is the implied annual rate of interest, given that compounded in quarterly? Note: give your answer in percentages. Note: Do not put % sign in your answer. Simply write the number in percentages in the answer box.

 

QUESTION 33

What is the future value of annual payments of $4,733 for 15 years at 7 percent?

 

QUESTION 34

If you can double your money in 22 years, what is the implied annual rate of interest, given that compounded semi-annually? Note: give your answer in percentages. Note: Do not put % sign in your answer. Simply write the number in percentages in the answer box.

 

QUESTION 35

How much do you need to invest today in order to have $6,515 at the end of 14 years if you are sure to earn an interest at the rate of 15%, if interest is compounded monthly? Note: Do not put $ sign in your answer. Simply write the number in the answer box.

 

QUESTION 36

If you put $700 in a savings account with a 10% nominal rate of interest compounded monthly, what will the investment be worth in 21 months (round to the nearest dollar)?

  a. $827
  b. $828
  c. $770
  d. $1,176
  e. $833

 

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