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You would like to establish a trust fund that would provide annual scholarships of $100,000 forever.How much would you have to deposit today in one lump sum to achieve this goal if you can earn a guaranteed 4.5 percent rate of return?


A) $1,678,342
B) $1,800,000
C) $2,413,435
D) $1,620,975
E) $2,222,222

F) A) and B)
G) B) and C)

Correct Answer

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You just borrowed $3,000 from your bank and agreed to repay the interest on an annual basis and the principal at the end of three years.What type of loan did you obtain?


A) Interest-only
B) Amortized
C) Perpetual
D) Pure discount
E) Lump sum

F) A) and B)
G) None of the above

Correct Answer

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A credit card has an annual percentage rate of 12.9 percent and charges interest monthly.The effective annual rate on this account:


A) will be less than 12.9 percent.
B) can either be less than or equal to 12.9 percent.
C) is 12.9 percent.
D) can either be greater than or equal to 12.9 percent.
E) will be greater than 12.9 percent.

F) A) and D)
G) A) and E)

Correct Answer

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A preferred stock pays an annual dividend of $4.50.What is one share of this stock worth to you today if you require a rate of return of 11 percent?


A) $56.14
B) $37.98
C) $43.00
D) $40.91
E) $38.56

F) A) and E)
G) C) and D)

Correct Answer

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You plan to save $200 a month for the next 24 years and hope to earn an average rate of return of 10.6 percent.How much more will you have at the end of the 24 years if you invest your money at the beginning rather than the end of each month?


A) $1,911.29
B) $1,807.70
C) $2,238.87
D) $2,317.82
E) $2,707.27

F) A) and E)
G) C) and D)

Correct Answer

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Which one of the following statements is correct?


A) The APR is equal to the EAR for a loan that charges interest monthly.
B) The EAR is always greater than the APR.
C) The APR on a monthly loan is equal to (1 + monthly interest rate) 12- 1.
D) The APR is the best measure of the actual rate you are paying on a loan.
E) The EAR, rather than the APR, should be used to compare both investment and loan options.

F) D) and E)
G) B) and D)

Correct Answer

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Kurt wants to have $835,000 in an investment account six years from now.The account will pay .67 percent interest per month.If he saves money every month,starting one month from now,how much will he have to save each month to reach his goal?


A) $9,062.07
B) $9,497.03
C) $8,838.22
D) $8,501.03
E) $8,808.11

F) A) and B)
G) C) and D)

Correct Answer

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Which one of the following statements concerning annuities is correct?


A) The present value of an annuity is equal to the cash flow amount divided by the discount rate.
B) An annuity due has payments that occur at the beginning of each time period.
C) The future value of an annuity decreases as the interest rate increases.
D) If unspecified, you should assume an annuity is an annuity due.
E) An annuity is an unending stream of equal payments occurring at equal intervals of time.

F) B) and C)
G) A) and B)

Correct Answer

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A preferred stock offers a rate of return of 5.45 percent and sells for $78.20? What is the annual dividend amount?


A) $4.26
B) $4.09
C) $3.53
D) $4.50
E) $3.87

F) A) and B)
G) B) and E)

Correct Answer

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Kristina started setting aside funds three years ago to save for a down payment on a house.She has saved $900 each quarter and earned an average rate of return of 4.8 percent.How much money does she currently have saved?


A) $11,542.10
B) $12,388.19
C) $15,209.80
D) $15,366.67
E) $16,023.13

F) A) and B)
G) None of the above

Correct Answer

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Jake owes $3,990 on a credit card with an APR of 13.9 percent.How much more will it cost him to pay off this balance if he makes monthly payments of $50 rather than $60? Assume he does not charge any further purchases.


A) $2,409
B) $2,811
C) $1,648
D) $1,018
E) $3,545

F) A) and E)
G) A) and D)

Correct Answer

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Round House Furniture offers credit to its customers at a rate of 1.15 percent per month.What is the effective annual rate of this credit offer?


A) 14.13 percent
B) 13.80 percent
C) 14.41 percent
D) 15.04 percent
E) 14.71 percent

F) B) and D)
G) D) and E)

Correct Answer

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City Motors will sell a $15,000 car for $345 a month for 52 months.What is the interest rate?


A) 9.28 percent
B) 8.67 percent
C) 8.53 percent
D) 9.10 percent
E) 8.38 percent

F) A) and B)
G) C) and D)

Correct Answer

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So you can retire early,you have decided to start saving $500 a month starting one month from now.You plan to retire as soon as you can accumulate $1 million.If you can earn 5 percent on your savings,how many years will it be before you can retire?


A) 33.39 years
B) 42.87 years
C) 44.76 years
D) 44.71 years
E) 33.87 years

F) A) and E)
G) C) and D)

Correct Answer

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