FIN 200 CHAPTER 5 QUIZZES WITH
COMPLETE SOLUTIONS
The manager of Steve's Audio has approved Daisy's application for 24 months of credit
with maximum monthly payments of $45. If the APR is 19.2 percent, what is the
maximum initial purchase that Daisy can buy on credit? - Answer- $890.99
You will receive annual payments of $800 at the end of each year for 12 years. The first
payment will be received in Year 3. What is the present value of these payments if the
discount rate is 7 percent? - Answer- $5,549.96
London Motors will sell a $24,000 car for $335 per month for 60 months. What is the
interest rate? - Answer- 6.77 percent
You owe $6,800 on a car loan that has an interest rate of 6.75 percent and monthly
payments of $310. You lost your job and your new job pays less, so your lender just
agreed to lower the monthly payments to $225 while keeping the interest rate at 6.75
percent. How much longer will it take you to repay this loan than you had originally
planned? - Answer- 9.74 months
Retirement Investment Advisors, Inc., has just offered you an annual interest rate of 4.1
percent until you retire in 45 years. You believe that interest rates will increase over the
next year and you would be offered 4.7 percent per year one year from today. If you
plan to deposit $11,500 into the account either this year or next year, how much more
will you have when you retire if you wait one year to make your deposit? - Answer-
$16,624.04
Both you and your older brother would like to have $29,500 in 16 in years. Because of
your success in this class, you feel that you are a more savvy investor than your brother
and will be able to earn an annual return of 10.7 percent compared to your brother's 9.2
percent. How much less than your brother will you have to deposit today? - Answer-
$1,414.96
You need to have $33,750 in 11 in years. You can earn an annual interest rate of 6
percent for the first 3 years, 6.6 percent for the next 2 years, and 7.3 percent for the
final 6 years. How much do you have to deposit today? - Answer- $16,339.68
Both you and your older brother would like to have $21,000 in 12 in years. Because of
your success in this class, you feel that you are a more savvy investor than your brother
, and will be able to earn an annual return of 10.6 percent compared to your brother's 9.1
percent. How much less than your brother will you have to deposit today? - Answer-
$1,116.10
You need to have $30,000 in 20 in years. You can earn an annual interest rate of 3
percent for the first 6 years, 3.6 percent for the next 5 years, and 4.3 percent for the
final 9 years. How much do you have to deposit today? - Answer- $14,412.53
You expect to receive a payout from a trust fund in 4 years. The payout will be for
$11,200. You plan to invest the money at an annual rate of 6.6 percent until the account
is worth $19,300. How many years do you have to wait from today? - Answer- 12.51
years
Your sister just deposited $14,500 into an investment account. She believes that she
will earn an annual return of 10.6 percent for the next 8 years. You believe that you will
only be able to earn an annual return of 10 percent over the same period. How much
more must you deposit today in order to have the same amount as your sister in 8
years? - Answer- $644.94
Retirement Investment Advisors, Inc., has just offered you an annual interest rate of 4.5
percent until you retire in 45 years. You believe that interest rates will increase over the
next year and you would be offered 5.1 percent per year one year from today. If you
plan to deposit $13,500 into the account either this year or next year, how much more
will you have when you retire if you wait one year to make your deposit? - Answer-
$22,611.54
You need to have $31,750 in 20 in years. You can earn an annual interest rate of 6
percent for the first 6 years, 6.6 percent for the next 5 years, and 7.3 percent for the
final 9 years. How much do you have to deposit today? - Answer- $8,624.32
Your sister just deposited $6,000 into an investment account. She believes that she will
earn an annual return of 8.9 percent for the next 7 years. You believe that you will only
be able to earn an annual return of 8.2 percent over the same period. How much more
must you deposit today in order to have the same amount as your sister in 7 years? -
Answer- $277.05
Freya plans to invest $3,200 a year for 25 years starting at the end of this year. How
much will this investment be worth at the end of the 25 years if she earns an average
annual rate of return of 8.2 percent? - Answer- $240,885.11
Moonlight Industries just signed a sales contract with a new customer. JK will receive
annual payments in the amount of $50,000, $96,000, $123,000, and $138,000 at the
end of Years 1 to 4, respectively. What is this contract worth at the end of Year 4 if the
firm earns 3.75 percent on its savings? - Answer- $424,786.07
COMPLETE SOLUTIONS
The manager of Steve's Audio has approved Daisy's application for 24 months of credit
with maximum monthly payments of $45. If the APR is 19.2 percent, what is the
maximum initial purchase that Daisy can buy on credit? - Answer- $890.99
You will receive annual payments of $800 at the end of each year for 12 years. The first
payment will be received in Year 3. What is the present value of these payments if the
discount rate is 7 percent? - Answer- $5,549.96
London Motors will sell a $24,000 car for $335 per month for 60 months. What is the
interest rate? - Answer- 6.77 percent
You owe $6,800 on a car loan that has an interest rate of 6.75 percent and monthly
payments of $310. You lost your job and your new job pays less, so your lender just
agreed to lower the monthly payments to $225 while keeping the interest rate at 6.75
percent. How much longer will it take you to repay this loan than you had originally
planned? - Answer- 9.74 months
Retirement Investment Advisors, Inc., has just offered you an annual interest rate of 4.1
percent until you retire in 45 years. You believe that interest rates will increase over the
next year and you would be offered 4.7 percent per year one year from today. If you
plan to deposit $11,500 into the account either this year or next year, how much more
will you have when you retire if you wait one year to make your deposit? - Answer-
$16,624.04
Both you and your older brother would like to have $29,500 in 16 in years. Because of
your success in this class, you feel that you are a more savvy investor than your brother
and will be able to earn an annual return of 10.7 percent compared to your brother's 9.2
percent. How much less than your brother will you have to deposit today? - Answer-
$1,414.96
You need to have $33,750 in 11 in years. You can earn an annual interest rate of 6
percent for the first 3 years, 6.6 percent for the next 2 years, and 7.3 percent for the
final 6 years. How much do you have to deposit today? - Answer- $16,339.68
Both you and your older brother would like to have $21,000 in 12 in years. Because of
your success in this class, you feel that you are a more savvy investor than your brother
, and will be able to earn an annual return of 10.6 percent compared to your brother's 9.1
percent. How much less than your brother will you have to deposit today? - Answer-
$1,116.10
You need to have $30,000 in 20 in years. You can earn an annual interest rate of 3
percent for the first 6 years, 3.6 percent for the next 5 years, and 4.3 percent for the
final 9 years. How much do you have to deposit today? - Answer- $14,412.53
You expect to receive a payout from a trust fund in 4 years. The payout will be for
$11,200. You plan to invest the money at an annual rate of 6.6 percent until the account
is worth $19,300. How many years do you have to wait from today? - Answer- 12.51
years
Your sister just deposited $14,500 into an investment account. She believes that she
will earn an annual return of 10.6 percent for the next 8 years. You believe that you will
only be able to earn an annual return of 10 percent over the same period. How much
more must you deposit today in order to have the same amount as your sister in 8
years? - Answer- $644.94
Retirement Investment Advisors, Inc., has just offered you an annual interest rate of 4.5
percent until you retire in 45 years. You believe that interest rates will increase over the
next year and you would be offered 5.1 percent per year one year from today. If you
plan to deposit $13,500 into the account either this year or next year, how much more
will you have when you retire if you wait one year to make your deposit? - Answer-
$22,611.54
You need to have $31,750 in 20 in years. You can earn an annual interest rate of 6
percent for the first 6 years, 6.6 percent for the next 5 years, and 7.3 percent for the
final 9 years. How much do you have to deposit today? - Answer- $8,624.32
Your sister just deposited $6,000 into an investment account. She believes that she will
earn an annual return of 8.9 percent for the next 7 years. You believe that you will only
be able to earn an annual return of 8.2 percent over the same period. How much more
must you deposit today in order to have the same amount as your sister in 7 years? -
Answer- $277.05
Freya plans to invest $3,200 a year for 25 years starting at the end of this year. How
much will this investment be worth at the end of the 25 years if she earns an average
annual rate of return of 8.2 percent? - Answer- $240,885.11
Moonlight Industries just signed a sales contract with a new customer. JK will receive
annual payments in the amount of $50,000, $96,000, $123,000, and $138,000 at the
end of Years 1 to 4, respectively. What is this contract worth at the end of Year 4 if the
firm earns 3.75 percent on its savings? - Answer- $424,786.07
