Business Finance 5

Lee pays 1 percent per month interest on his credit card account. When his monthly rate is multiplied by 12, the resulting answer is referred to as the:a. annual percentage rate.b. compounded rate.c. effective annual rate.d. perpetual rate.e. simple rate. a. annual percentage rate.
Which one of the following can be classified as an annuity but not as a perpetuity?a. Increasing monthly payments foreverb. Increasing quarterly payments for six yearsc. Unequal payments each year for nine yearsd. Equal annual payments for lifee. Equal weekly payments forever d. Equal annual payments for life
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. b. An annuity due has payments that occur at the beginning of each time period.
Which one of the following qualifies as an annuity payment?a. Weekly grocery billb. Clothing purchasesc. Car repairsd. Auto loan paymente. Medical bills d. Auto loan payment
A loan has an APR of 8.5 percent and an EAR of 8.5 percent. Given this, the loan must:a. have a one-year term.b. have a zero percent interest rate.c. charge interest annually.d. must be partially amortized with each loan payment.e. require the accrued interest be paid in full with each monthly payment. c. charge interest annually.
Scott borrowed $2,500 today at an APR of 7.4 percent. The loan agreement requires him to repay $2,685 in one lump sum payment one year from now. This type of loan is referred to as a(n):a. interest-only loan.b. pure discount loan.c. quoted rate loan.d. compound interest loan.e. amortized loan. b. pure discount loan.
Travis borrowed $10,000 four years ago at an annual interest rate of 7 percent. The loan term is six years. Since he borrowed the money, Travis has been making annual payments of $700 to the bank. Which type of loan does he have?a. Interest-onlyb. Pure discountc. Compoundd. Amortizede. Complex a. Interest-only
Bill just financed a used car through his credit union. His loan requires payments of $275 a month for five years. Assuming that all payments are paid on time, his last payment will pay off the loan in full. What type of loan does Bill have?a. Amortizedb. Complexc. Pure discountd. Lump sume. Interest-only a. Amortized
How much money does Suzie need to have in her retirement savings account today if she wishes to withdraw $42,000 a year for 25 years? She expects to earn an average rate of return of 9.75 percent.a. $426,580.50b. $407,419.81c. $401,533.33d. $385,160.98e. $388,683.83 e. $388,683.83
Charlene can afford car payments of $185 a month for 48 months. If the interest rate is 5.65 percent, how much money can she afford to borrow?a. $7,931.44b. $7,734.95c. $7,899.60d. $8,022.15e. $8,422.09 a. $7,931.44
The manager of Gloria’s Boutique has approved Carla’s application for 24 months of credit with maximum monthly payments of $70.If the APR is 14.2 percent, what is the maximum initial purchase that Carla can buy on credit?a. $1,006.90b. $1,300.00c. $1,455.08d. $1,184.75e. $1,228.46 c. $1,455.08
Postal Express is considering the purchase of a new sorting machine. The sales quote consists of quarterly payments of $37,200 for five years at 7.6 percent interest. What is the purchase price?a. $621,380.92b. $614,184.40c. $687,418.22d. $774,311.28e. $836,267.35 b. $614,184.40
Katie’s Dinor spent $113,800 to refurbish its current facility. The firm borrowed 65 percent of the refurbishment cost at 6.82 percent interest for six years. What is the amount of each monthly payment?a. $1,108.91b. $1,282.16c. $1,333.33d. $1,254.73e. $1,087.06 d. $1,254.73
Good Guys will pay you $3,800 a year for 10 years in exchange for $31,300 today. What interest rate will you earn on this annuity? a. 1.67 percentb. 3.69 percentc. 5.50 percentd. 2.55 percente. 2.38 percent b. 3.69 percent
You owe $6,800on a car loan that has an interest rate of 6.75 percent and monthly payments of $310. You lost your job and your new job pays less, so your lender just agreed to lower the monthly payments to $225 while keeping the interest rate at 6.75 percent. How much longer will it take you to repay this loan than you had originally planned?a. 10.50 monthsb. 11.47 monthsc. 9.74 monthsd. 12.19 monthse. 18.90 months c. 9.74 months
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. $11,542.10b. $12,388.19c. $15,209.80d. $15,366.67e. $16,023.13 a. $11,542.10
Lacey will receive $135,000 a year for 5 years, starting today. If the rate of return is 8.9 percent, what are these payments worth today?a. $568,346.72b. $531,019.80c. $573,323.90d. $564,009.27e. $526,468.23 c. $573,323.90
What is the value today of $3,600 received at the end of each year for eight years if the first payment is paid exactly four years from today and the discount rate is 12 percent?a. $11,694.21b. $12,484.57c. $12,729.12d. $15,089.23e. $14,429.52 c. $12,729.12
You will receive annual payments of $800 at the end of each year for 12 years. The first payment will be received in Year 3. What is the present value of these payments if the discount rate is 7 percent?a. $5,465.20b. $6,018.52c. $6,299.80d. $5,549.96e.$6,856.60 d. $5,549.96
What is the effective annual rate of 9.6 percent compounded semiannually?a. 9.71 percentb. 9.83 percentc. 9.79 percentd. 9.68 percente. 9.92 percent b. 9.83 percent
Today, you are borrowing $7,800 to purchase a car. What will be your monthly payment if the loan is for four years at 6.45 percent interest?a. $208.40b. $221.50c. $184.80d. $180.24e. $200.10 c. $184.80
Jeffries & Sons is borrowing $95,000 for four years at an APR of 7.05 percent. The principal is to be repaid in equal annual payments over the life of the loan with interest paid annually. Payments will be made at the end of each year. What is the total payment due for Year 3 of this loan?a. $28,224.90b. $27,098.75c. $25,424.38d. $30,447.50 e. $28,773.13 b. $27,098.75
The Egg House just borrowed $660,000 to build a new restaurant. The loan terms call for equal annual payments at the end of each year. The loan is for 15 years at an APR of 8.35 percent. How much of the first annual payment will be used to reduce the principal balance?a. $21,311.62b. $23,653.18c. $18,211.08d. $48,911.08e. $51,420.90 b. $23,653.18
A 4-year annuity of eight $6,200 semiannual payments will begin 6 years from now, with the first payment coming 6.5 years from now. If the discount rate is 7 percent, compounded semiannually, what is the value of this annuity 4 years from now?a. $37,139.58b. $38,399.20c. $40,687.14d. $41,811.67e. $42,618.52 a. $37,139.58
Given an interest rate of 14.6 percent per year, what is the value at t = 8 of a perpetual stream of $1,250 annual payments that begin t =25?a. $2,412.02b. $967.39c. $3,335.96d. $2,235.06e. $1,711.41 b. $967.39

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