FRL 300 Practice Problems

Today the Jenkins Family Fun Center deposited 4,000 in an investment account for the purpose of buying new equipment five years from today. In ONE year they will add another 5,800 to this account. They plan on making a final deposit of 8,000 to the account in 2 years. How much will be available when they are ready to buy the equipment, assuming they earn a 7 % rate of return?

$23,013.17

A preferred stock pays an annual dividend of $3.20 What is 1 share of this stock worth today if the rate of return is 11.75 % ?

$27.23

If you put up 29,000 today in exchange for a 7.25 % , 16 year annuity, what will the annual cash flow be?

$3,120.92

The PV of a cash flow stream is 6,820, when discounted at 11% annually 1 -> 1,500 2 -> ? 3 -> 1,800 4 -> 2,400 What is the dollar amount of the missing cash flow?

$3,168.41

Theresa adds 1500 to her savings account on the first day of each year. Marcus adds 1500 to his Savings account on the LAST day of each year. They BOTH earn 6.5% annual interest. What is the difference in their saving account balances at the end of 35 years?

12,093

A year ago you deposited 40,000 into a retirement savings account at a fixed rate of 5.5%. Today, you could earn a fixed rate of 6.5 % on a similar account. However, your rate is fixed and cant be adjusted. How much LESS could you have deposited last year if you could have earned a fixed rate of 6.5% and still have the same amount as you currently will when you retire 38 years from today?

12,313.30

Alex invested 10,500 in an account that pays 6 % simple interest. How much money will he have at the end of four years?

13,020

Today, you turn 23 Your birthday wish is that you will be a millionaire by you 40th birthday In an attempt to reach this goal, you decide to save 75 a day everyday first thing in the morning until you turn 40. You open an investment account and deposit your first 75 today in the morning What annual rate of return must you earn to achieve your goal?

8.09%

Alexa plans on saving 3,000 a year and expects to earn an annual rate of 10.25 percent HOW MUCH will she have in her account at the end of 45 years?

2,333,572

Marco Inc. is considering the purchase of ABC Co. Marco believes that ABC Co. can generate cash flows of 5,200 , 10,200 , and 16,400 over the next three years respectfully. After that time they feel the business will be worthless. Marco has determined that a rate of return of 14% is applicable to this potential purchase What is marco willing to pay today to Buy ABC Co. ?

23,479.51

You have just received notification that you have won the 1.4 million first prize centennial lottery. HOWEVER, the prize will be awarded on your 100th birthday, 78 years from now. The appropriate discount rate is 8% WHAT ARE YOU WINNINGS WORTH TO YOU TODAY?

3,459.99

On your 9th birthday, you received 300 , which you invested at 4.5% interest compounded annually. Your investment is now worth 756.07 HOW OLD ARE YOU TODAY?

30

Assume the average vehicle selling price in the United States last year was $41,996. The Avg price 10 years ago was 29,000 What was the ANNUAL INCREASE in the selling price over this time period?

4.20 Percent

In 1895, this winner of a competition was paid 150 In 2006, The winners prize was 70,000 What will the winners prize be in 2040, if the prize continues increasing at the same rate?

459,866

Today, You earn a salary of 36,000 What will be your annual salary 12 years from now if you earn annual raises of 3.6% ??

55,032.54

You have just won the lottery and will receive 540,000 as your first payment one year from now. You will receive payments for 26 years. The payments will increase in value by 4% each year. The appropriate discount rate is 10% What is the present value of your winnings?

6,906,372

Today you borrowed 6200 on your credit card to purchase some furniture. The Interest rate is 14.9% , compounded monthly, how long will it take you to pay off this debt, assuming that you do not charge anything else and make regular monthly payments of 120??

6.93 Years

Phil can afford 200 a month for 5 years for car loan payments. If the interest rate on a car loan is 7.5% , HOW MUCH can he afford to borrow to purchase a car?

9,981.06

Which one of the following statements related to annuities and perpetuity is correct?

A perpetuity composed of 100 $ monthly payments is worth more than an annuity of 100 $ monthly payments, given equal discount rates.

Andy deposited 3000 this morning into an account that pays 5% interest compounded annually. Barb also deposited 3000 this morning into an account that pays 5% interest Compounded annually . Andy will withdraw his interest earnings and spend it asap. Barb will re invest her interest earnings into her account. Given this, WHICH one of the following statements is true?

Andy will earn simple interest every year.

You are comparing two annuities which offer monthly payments of 2,500 for five years and pay 0.75 percent interest per month. Annuity A will pay you on the first of each month while Annuity B will pay you on the last day of each month. Which of the following statements is correct concerning the two annuities?

Annuity B has a SMALLER present value than Annuity A.

Steve invested 200 two years ago at 5% interest. This first year, he earned 10$ interest on his 200 investment. He re invested the earn interest, The second Year he earned 10.50 $ interest on his 210 investment. The extra .50 he earned in interest, the second year is referred to as...

Interest on Interest

Samantha opened a savings account this morning. Her money will earn 5 % interest compounded annually. After 5 years, her savings account will be worth 5,600. Assume she will not make any withdrawals. Given this, which of the following statements are true?

She could have deposited less money and still had 5,600 in five years if she could have earned 5.5 % interest.

Which of the following accurately defines a Perpetuity?

unending equal payments paid at equal time intervals.