FIN5080 Quiz 3

Question: #6197

FIN5080 Quiz 3

1. How much do you need to invest today in order to have $5,692 at the end of 16 years if you are sure to earn an interest at the rate of 13%, if interest is compounded monthly?

2. How much do you need to invest today in order to have $10,891 at the end of 15 years if you are sure to earn an interest at the rate of 5%?

3. How much do you need to invest today in order to have $2,458 at the end of 15 years if you are sure to earn an interest at the rate of 8%, if interest is compounded quarterly?

4. The ABC Company is considering a new project which will require an initial cash investment of $15,870. The projected cash flows for years 1 through 4 are $5,630, $6,434, $8,928, and $4,501, respectively. If the appropriate discount rate is 9%, compute the NPV of the project.

5. What is the future value of $166 invested for 22 years at 15% if interest is compounded semi-annually?

6. 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)?

7. What should you be willing to pay in order to receive $984 annually forever, if you require 5% per year on the investment?

8. The Perpetual Life Insurance Co is trying to sell you an investment policy that will pay you and your heirs $12,217 per year forever. Suppose the Perpetual Life Insurance Co. told you the policy costs $198,704. At what interest rate would this be a fair deal?

9. What is the future value of quarterly payments of $806 for 19 years at 6 percent?

10. How many years it will take you to quadruple (means 4 times) your money if you can earn 7% each year?

11. What is the future value of $931 invested for 13 years at 19% if interest is compounded quarterly?

12. Kelly starting setting aside funds 10 years ago to buy some new equipment for her firm. She has saved $4,143 each quarter and earned an average rate of return of 7 percent. How much money does she currently have saved for this purpose?

13. 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.

14. 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?

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

16. If you receive $130 at the end of each year for the first three years and $691 at the end of each year for the next three years. What is the present value? Assume interest rate is 6%.

17. If you can double your money in 10 years, what is the implied annual rate of interest, given that compounded in quarterly?

18. What is the future value of $9,262 for 14 years at 6 percent if interest is compounded semi-annually?

19. How many years it will take to grow your money from $3,622 to $7,821 if you can earn an interest of 18% compounded quarterly?

20. What is the future value of annual payments of $2,947 for 15 years at 6 percent?

21. The ABC Company is considering a new project which will require an initial cash investment of $5,845. The project will produce no cash flows for the first 5 years. The projected cash flows for years 6 through 9 are $5,229, $4,972, $4,524, and $2,595, respectively. If the appropriate discount rate is 9%, compute the NPV of the project.

22. Say, you deposit $2,652 in a bank for 18 years. What is the amount you will have in the bank at the end of 18 years if interest of 7 % for first 9 years and interest of 9 % for the remaining years?

23. What is the future value of $523 invested for 9 years at 12% if interest is compounded semi-annually (twice a year)?

24. 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?

25. What is the effective rate of 18% compounded monthly?

26. If you can double your money in 7 years, what is the implied annual rate of interest, given that compounded semi-annually?

27. If the effective rate is 14%. What is the nominal rate if compounding is daily. Do not enter the symbol % in your answer.

28. How many months it will take to grow your money from $4,694 to $6,134 if you can earn an interest of 12% compounded monthly?

29. Assume interest rate of 9%. A company receives cash flows of $118,666 at the end of years 4, 5, 6, 7, and 8, and cash flows of $263,530 at the end of year 10. Compute the future value of this cash flow stream.

30. If you can triple your money in 8 years, what is the implied rate of interest? Note: Do not put % sign in your answer.

31. How many years it will take to grow your money from $3,863 to $7,930 if you can earn an interest of 12% compounded monthly?

32. How many years it will take you to double your money if you can earn 13% each year, given that compounding is quarterly?

33. Barrett Pharmaceuticals is considering a drug project that costs $192,431 today and is expected to generate end-of-year annual cash flows of $13,021, forever. At what discount rate would Barrett be indifferent between accepting and rejecting the project?

34. Assume interest rate of 11%. A company receives cash flows of $547 at the end of year 5, $205 at the end of year 7, and $515 at the end of year 10. Compute the future value of this cash flow stream.

35. Assume interest rate of 6%. Suppose that you receive $75,081 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.

36. Say, you deposit $2,079 in a bank for 15 years. What is the amount you will have in the bank at the end of 15 years if interest of 7 % compounded monthly for first 6 years and interest of 7 % compounded quarterly for the remaining years?

Solution: #6203

FIN5080 - Quiz 3

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