【正文】 year period if the interest had pounded annually? A. $ B. $ C. $ D. $ E. $ Ending value at 4% simple interest = $1,000 + ($1,000 ? .04 ? 5) = $1,。 Ending value at 4% pounded annually = $1,000 ? (1 +.04)5 = $1,。 Difference = $1, $1, = $ Difficulty level: Easy Topic: SIMPLE VERSUS COMPOUND INTEREST Type: PROBLEMS Chapter 04 Discounted Cash Flow Valuation 435 52. Your firm wants to save $250,000 to buy some new equipment three years from now. The plan is to set aside an equal amount of money on the first day of each year starting today. The firm can earn a % rate of return. How much does the firm have to save each year to achieve its goal? A. $75, B. $76, C. $78, D. $ E. $83, Difficulty level: Medium Topic: ANNUITY DUE PAYMENTS AND FUTURE VALUE Type: PROBLEMS Chapter 04 Discounted Cash Flow Valuation 436 53. Today is January 1. Starting today, Sam is going to contribute $140 on the first of each month to his retirement account. His employer contributes an additional 50% of the amount contributed by Sam. If both Sam and his employer continue to do this and Sam can earn a monthly rate of 189。 of 1 percent, how much will he have in his retirement account 35 years from now? A. $199, B. $200, C. $249, D. $299, E. $300, Difficulty level: Medium Topic: ANNUITY DUE PAYMENTS AND FUTURE VALUE Type: PROBLEMS 54. You are considering an annuity which costs $100,000 today. The annuity pays $6,000 a year. The rate of return is %. What is the length of the annuity time period? A. years B. years C. years D. years E. years Difficulty level: Medium Topic: ORDINARY ANNUITY TIME PERIODS AND PRESENT VALUE Type: PROBLEMS Chapter 04 Discounted Cash Flow Valuation 437 55. Today, you signed loan papers agreeing to borrow $4, at 9% pounded monthly. The loan payment is $ a month. How many loan payments must you make before the loan is paid in full? A. B. C. D. E. Difficulty level: Medium Topic: ORDINARY ANNUITY TIME PERIODS AND PRESENT VALUE Type: PROBLEMS Chapter 04 Discounted Cash Flow Valuation 438 56. Winston Enterprises would like to buy some additional land and build a new factory. The anticipated total cost is $136 million. The owner of the firm is quite conservative and will only do this when the pany has sufficient funds to pay cash for the entire expansion project. Management has decided to save $450,000 a month for this purpose. The firm earns 6% pounded monthly on the funds it saves. How long does the pany have to wait before expanding its operations? A. months B. months C. months D. months E. months Difficulty level: Medium Topic: ORDINARY ANNUITY TIME PERIODS AND FUTURE VALUE Type: PROBLEMS Chapter 04 Discounted Cash Flow Valuation 439 57. Today, you are retiring. You have a total of $413,926 in your retirement savings and have the funds invested such that you expect to earn an average of 3%, pounded monthly, on this money throughout your retirement years. You want to withdraw $2,500 at the beginning of every month, starting today. How long will it be until you run out of money? A. months B. months C. months D. months E. months Difficulty level: Medium Topic: ANNUITY DUE TIME PERIODS AND PRESENT VALUE Type: PROBLEMS Chapter 04 Discounted Cash Flow Valuation 440 58. The Bad Guys Co. is notoriously known as a slowpayer. It currently needs to borrow $25,000 and only one pany will even deal with Bad Guys. The terms of the loan call for daily payments of $. The first payment is due today. The interest rate is 21% pounded daily. What is the time period of this loan? A. years B. years C. years D. years E. years Difficulty level: Medium Topic: ANNUITY DUE TIME PERIODS Type: PROBLEMS Chapter 04 Discounted Cash Flow Valuation 441 59. The Robertson Firm is considering a project which costs $123,900 to undertake. The project will yield cash flows of $4, monthly for 30 months. What is the rate of return on this project? A. % B. % C. % D. % E. % This can not be solved directly, so it39。s easiest to just use the calculator method to get an answer. You can then use the calculator answer as the rate in the formula just to verify that your answer is correct. Difficulty level: Medium Topic: ORDINARY ANNUITY INTEREST RATE Type: PROBLEMS Chapter 04 Discounted Cash Flow Valuation 442 60. Your insurance agent is trying to sell you an annuity that costs $100,000 today. By buying this annuity, your agent promises that you will receive payments of $ a month for the next 40 years. What is the rate of return on this investment? A. % B. % C. % D. % E. % This can not be solved directly, so it39。s easiest to just use the calculator method to get an answer. You can then use the calculator answer as the rate in the formula just to verify that you answer is correct. Difficulty level: Medium Topic: ORDINARY ANNUITY INTEREST RATE Type: PROBLEMS Chapter 04 Discounted Cash Flow Valuation 443 61. You have been investing $120 a month for the last 15 years. Today, your investment account is worth $47,. What is your average rate of return on your investments? A. % B. % C. % D. % E. % This can not be solved directly, so it39。s easiest to just use the calculator method to get an answer. You can then use the calculator answer as the rate in the formula just to verify that you answer is correct. Difficulty level: Medium Topic: ORDINARY ANNUITY INTEREST RATE Type: PROBLEMS Chapter 04 Discounted Cash Flow Valuation 444 62. Brinker, Inc. has been investing $136,000 a year for the past 4 years into a business venture. To