23. If you have a choice to earn simple interest on $10,000 for three years at 8% or annually compounded interest at 7.5% for three years which one will pay more and by how much? A. Simple interest by $50.00
B. Compound interest by $22.97 C. Compound interest by $150.75 D. Compound interest by $150.00 E. None of the above.
Simple Interest = $10,000 (.08)(3) = $2,400; 3Compound Interest = $10,000((1.075) - 1) = $2,422.97;
Difference = $2,422.97 - $2,400 = $22.97
Difficulty level: Easy Topic: SIMPLE & COMPOUND INTEREST Type: PROBLEMS
24. Bradley Snapp has deposited $7,000 in a guaranteed investment account with a promised rate of 6% compounded annually. He plans to leave it there for 4 full years when he will make a down payment on a car after graduation. How much of a down payment will he be able to make?
A. $1,960.00 B. $2,175.57 C. $8,960.00 D. $8,837.34 E. $9,175.57
4$7,000 (1.06) = $8,837.34
Difficulty level: Easy Topic: FUTURE VALUE - SINGLE SUM Type: PROBLEMS
4-9
Chapter 04 - Discounted Cash Flow Valuation
25. Your parents are giving you $100 a month for four years while you are in college. At a 6% discount rate, what are these payments worth to you when you first start college? A. $3,797.40
B. $4,167.09 C. $4,198.79 D. $4,258.03 E. $4,279.32
Difficulty level: Easy Topic: ORDINARY ANNUITY AND PRESENT VALUE Type: PROBLEMS
4-10
Chapter 04 - Discounted Cash Flow Valuation
26. You just won the lottery! As your prize you will receive $1,200 a month for 100 months. If
you can earn 8% on your money, what is this prize worth to you today? A. $87,003.69
B. $87,380.23
C. $87,962.77 D. $88,104.26 E. $90,723.76
Difficulty level: Easy Topic: ORDINARY ANNUITY AND PRESENT VALUE Type: PROBLEMS
4-11
Chapter 04 - Discounted Cash Flow Valuation
27. Todd is able to pay $160 a month for five years for a car. If the interest rate is 4.9%, how
much can Todd afford to borrow to buy a car? A. $6,961.36 B. $8,499.13 C. $8,533.84 D. $8,686.82 E. $9,588.05
Difficulty level: Easy Topic: ORDINARY ANNUITY AND PRESENT VALUE Type: PROBLEMS
4-12
Chapter 04 - Discounted Cash Flow Valuation
28. You are the beneficiary of a life insurance policy. The insurance company informs you that you have two options for receiving the insurance proceeds. You can receive a lump sum of $50,000 today or receive payments of $641 a month for ten years. You can earn 6.5% on your money. Which option should you take and why?
A. You should accept the payments because they are worth $56,451.91 today. B. You should accept the payments because they are worth $56,523.74 today. C. You should accept the payments because they are worth $56,737.08 today. D. You should accept the $50,000 because the payments are only worth $47,757.69 today. E. You should accept the $50,000 because the payments are only worth $47,808.17 today.
Difficulty level: Medium Topic: ORDINARY ANNUITY AND PRESENT VALUE Type: PROBLEMS
4-13
Chapter 04 - Discounted Cash Flow Valuation
29. Your employer contributes $25 a week to your retirement plan. Assume that you work for your employer for another twenty years and that the applicable discount rate is 5%. Given these
assumptions, what is this employee benefit worth to you today? A. $13,144.43
B. $15,920.55 C. $16,430.54 D. $16,446.34 E. $16,519.02
Difficulty level: Medium Topic: ORDINARY ANNUITY AND PRESENT VALUE Type: PROBLEMS
4-14
Chapter 04 - Discounted Cash Flow Valuation
30. You have a sub-contracting job with a local manufacturing firm. Your agreement calls for
annual payments of $50,000 for the next five years. At a discount rate of 12%, what is this job
worth to you today? A. $180,238.81 B. $201,867.47 C. $210,618.19 D. $223,162.58 E. $224,267.10
罗斯公司理财第四章全英文题库及答案
