FIN 301 - Chapter 9

Assuming you are in the 25% tax bracket, what is your after-tax rate on a 4% CD?

3

What interest rate would you have to earn if you wanted to double an investment in 5 years?

14.4

An investor will receive a 7-year annuity of $2,000 per year. If the annual interest rate is 6%, what is the present value of this annuity?

11165

Vanessa makes a payment of $23,000 a year on her boat. At the end of 15 years, she's paid off the entire $175,000 loan. What was her approximate annual interest rate?

9.99

Your uncle needs $1,200,000 upon retirement in 10 years to live comfortably. He can invest $75,000 a year to his retirement. What interest rate would his investment need to appreciate at in order for him to meet his goals?

10.08

If you invest $5,000 today, assuming it grows at 7.5% per year (tax-free), how much will this be worth in 5 years?

7178

If you invest $1,300 today at a rate of 7% (tax-free), how much will it be worth 10 years from now?

2557

James will inherit a lump sum amount of $150,000 that is payable in 5 years. The current rate of return is 8%. What is the present value of the lump sum?

102087

How much would you pay in total interest if you bought a car for $25,000 that was fully financed with a 5.5% auto loan that lasted 5 years (assuming that you make payments annually)?

4272

What payment would you need to make yearly into your savings account if you wanted $225,000 in 25 years, with a tax-rate of 25% and an average market return of 8%?

4101

21. What is the future value of an investment if you make a deposit of $750 at the end of each year for a total of 9 years (assume 6.5% interest and no taxes)?

8799

23. How much money would you have to invest each year in order to have $35,000 in 10 years (assuming 7% interest)?

9526

Homer and Marge open separate accounts worth $3,000 that both have a return of 6%. However, Homer's account accrues Simple Interest and Marge's accrues Compound Interest. Which of the following statements is true about their accounts in 5 years?

Marge's Account is worth $115 more than Homer's

If you invest $1,300 a year, what would be the value of this investment at the end of 16 years at an interest rate of 7% and a tax rate of 30%?

30506

Graham borrows $450,000 from a bank at 6.5%. It is a 30 year mortgage. What is his annual payment?

34460

31. Tom borrowed a home mortgage loan of $450,000 at 5% with 30 equal annual payments of $29,273. After the 10th payment, how much does he owe to the bank?

364810

Upon graduating from Penn State, Jim has $70,000 worth of student loans with an interest rate of 3.5%. How many years must the loan be if James's annual payment budget is $4,925?

20

If you took out a $225,000 mortgage loan to be repaid in annual payments of $16,346 over 30 years at 6%, calculate the amount of principal reduction in the first year.

2846

Suppose you plan to invest $200 every year in savings account for the next 40 years. The bank offers you a 10% interest rate and the current tax rate is 40%. An alternative investment is an IRA (tax-free investment), which has an expected return of 8%. Wh

You will get $20,859 more if you choose the IRA

13 years ago, you invested $2450. The investment has grown to $5900. What is your rate of return?

6.99

How much money do you need to invest today to have $1,000 in 4 years at 7% interest?

763

A 5-year $1,000 bond has a coupon rate of 6% (payable semi-annually). If a comparable bonds yield today is 8%, what is the value of the bond ?

919

Anne needs $750,000 to run her business. She can finance it with a bank loan at 5% for 20 years. Her annual payment is $60,181.94 Suppose interest rates on similar loans immediately increase to 7%. What is Anne's 5% loan worth now?

637568

Philip borrowed bought a car for $18,000 with a bank loan with 9% interest rate and 10 equal annual payments. How much will he have to pay annually to repay the loan in 10 years?

2805

Increase in interest rates lead to a _________ in bond prices?

decreases