Finance 301 exam 2 ACTUAL EXAM
2026/2027 COMPLETE QUESTIONS WITH
CORRECT DETAILED ANSWERS ||
GUARANTEED PASS
1. A 60-year old considers an annuity that will provide $50,000 per year for 20
years. She is willing to wait until 7 years later to receive the first payment.
Assume the interest rate is 3.75%. What is the price of the deferred annuity
at the year 6, one year before the annuity begins? - ANSWER ✅
$694,810.21
PV6= 50,000*(1- 1/1.037520)/0.0375=694,810.21
PV0= 694,810.21/1.03756=557,105.65
2. Continued with previous question. What should be the fair price of the
deferred annuity today? - ANSWER ✅ $557,105.65
PV6= 50,000*(1- 1/1.037520)/0.0375=694,810.21
PV0= 694,810.21/1.03756=557,105.65
3. Mr. Smith has $600,000 total retirement saving. Assume he can earn 4.5%
on his money and he withdraw $50,000 at the end of each year. How long
will it last before he runs out of his saving? - ANSWER ✅ 17.64
compute n in the annuity equation
600,000=50,000*(1-1/1.045n)/0.045
n=17.64
Your friend needs your help for retirement planning. The following
information is what you gather from your conversations.
, She wants to retire at 65. Her financial goal is to save enough money before
then, so she can enjoy a living standard of $80,000 a year for 25 years.
Her employer provides a 401 account. She will contribute a fixed amount of
money each year for 30 years to the account. Currently she has no money in
the account and her first contribution will be made in a year.
You think an annual expected return of 8% on her retirement saving is
reasonable. On the day she retire, she needs to withdraw all the money from
the account. You suggest her to retain $80,000 for the first year living
expense and use the rest money to buy an annuity, which can pay her
$80,000 at the end of each year for the rest 24 years. In other words, the
saving should be enough to provide 25 annual payments of $80,000, with the
first p - ANSWER ✅ The total amount needed for the 25-year retirement
period, is also the target future value in 30- year investing period.
What is total amount needed on the day she retires? - ANSWER ✅
$1,364,669.41
use PVA due formula:
80,000*(1+3.5%)* (1- 1/1.035^25)/0.035 = 1,364,669.41
4. To be able to afford her desired retirement living, her goal of total saving in
30 years is $ - ANSWER ✅ $1364669.41
5. Continued with previous question. What is her required annual saving at the
end of each year? - ANSWER ✅ $12,046.53
use FVA ordinary annuity to solve for CF
1,364,669= CF* (1.0830 - 1)/0.08
CF= 12,046.53
6. The table below shows the CD annual percentage yield offered by four
banks:
Bank Compounding APY
2026/2027 COMPLETE QUESTIONS WITH
CORRECT DETAILED ANSWERS ||
GUARANTEED PASS
1. A 60-year old considers an annuity that will provide $50,000 per year for 20
years. She is willing to wait until 7 years later to receive the first payment.
Assume the interest rate is 3.75%. What is the price of the deferred annuity
at the year 6, one year before the annuity begins? - ANSWER ✅
$694,810.21
PV6= 50,000*(1- 1/1.037520)/0.0375=694,810.21
PV0= 694,810.21/1.03756=557,105.65
2. Continued with previous question. What should be the fair price of the
deferred annuity today? - ANSWER ✅ $557,105.65
PV6= 50,000*(1- 1/1.037520)/0.0375=694,810.21
PV0= 694,810.21/1.03756=557,105.65
3. Mr. Smith has $600,000 total retirement saving. Assume he can earn 4.5%
on his money and he withdraw $50,000 at the end of each year. How long
will it last before he runs out of his saving? - ANSWER ✅ 17.64
compute n in the annuity equation
600,000=50,000*(1-1/1.045n)/0.045
n=17.64
Your friend needs your help for retirement planning. The following
information is what you gather from your conversations.
, She wants to retire at 65. Her financial goal is to save enough money before
then, so she can enjoy a living standard of $80,000 a year for 25 years.
Her employer provides a 401 account. She will contribute a fixed amount of
money each year for 30 years to the account. Currently she has no money in
the account and her first contribution will be made in a year.
You think an annual expected return of 8% on her retirement saving is
reasonable. On the day she retire, she needs to withdraw all the money from
the account. You suggest her to retain $80,000 for the first year living
expense and use the rest money to buy an annuity, which can pay her
$80,000 at the end of each year for the rest 24 years. In other words, the
saving should be enough to provide 25 annual payments of $80,000, with the
first p - ANSWER ✅ The total amount needed for the 25-year retirement
period, is also the target future value in 30- year investing period.
What is total amount needed on the day she retires? - ANSWER ✅
$1,364,669.41
use PVA due formula:
80,000*(1+3.5%)* (1- 1/1.035^25)/0.035 = 1,364,669.41
4. To be able to afford her desired retirement living, her goal of total saving in
30 years is $ - ANSWER ✅ $1364669.41
5. Continued with previous question. What is her required annual saving at the
end of each year? - ANSWER ✅ $12,046.53
use FVA ordinary annuity to solve for CF
1,364,669= CF* (1.0830 - 1)/0.08
CF= 12,046.53
6. The table below shows the CD annual percentage yield offered by four
banks:
Bank Compounding APY
