BBA3301 Unit III Assessment

Subject: General Questions    / General General Questions
Question

Question 1

Sarah Wiggum would like to make a single investment and have $1.6 million at the time of her retirement in 35 years. She has found a retirement fund that will earn 3% annually. How much will Sarah have to invest today? If she earned an annual return of 20%, how soon could she then retire?

Path: pWords:0

20 points Save Answer

Question 2

Much to your surprise, you were selected to appear on the TV show, “The Price is Right.” As a result of your prowess in identifying how many rolls of toilet paper an average American family keeps on hand, you win the opportunity to choose one of the following: $2,000 today, $10,000 in 10 years, or $31,000 in 29 years. Assuming you can earn 12% on your money, which should you choose?

Path: pWords:0

20 points Save Answer

Question 3

To pay for your education, you have taken out $28,000 in student loans. If you make monthly payments over 13 years at 5% compounded monthly, how much are your monthly student loan payments?

Path: pWords:0

20 points Save Answer

Question 4

What is the present value of a perpetual stream of cash flow that pays $80,000 at the end of one year and grows at a rate of 5% indefinitely? The rate of interest used to discount the cash flows is 10%. What is the present value of the growing perpetuity?

Path: pWords:0

20 points Save Answer

Question 5

How much do you have to deposit today so that, beginning 11 years from now, you can withdraw $9,000 a year for the next 8 years (periods 11 through 18) plus an additional amount of $18,000 in the last year (period 18)? Assume an interest rate of 6%.