Finance Week 4 Sample Questions

Finance Week 4 Sample Questions

Question

Question 1
1.If you can double your money in 14 years, what is the implied annual rate of interest,
given that compounded semi-annually? Note: give your answer in percentages. Note: Do
not put % sign in your answer. Simply write the number in percentages in the answer
box.

Question 2
1. What is the future value of quarterly payments of $674 for 18 years at 7 percent?

Question 3
1. If you can double your money in 17 years, what is the implied annual rate of interest,
given that compounded in quarterly? Note: give your answer in percentages. Note: Do
not put % sign in your answer. Simply write the number in percentages in the answer
box.

Question 4
1. What is the future value of annual payments of $7,466 for 14 years at 6 percent?

Question 5
1. What should you be willing to pay in order to receive $549 annually forever, if you
require 5% per year on the investment?
Just enter the number up to 2 decimal points. Do not enter $ in the answer box.

Question 6
1. How many years it will take to grow your money from $3,428 to $6,835 if you can earn
an interest of 6% compounded quarterly? Note: Do not write "years" in your answer.
Simply write the number in the answer box.

Question 7
1. Kelly starting setting aside funds 8 years ago to buy some new equipment for her firm.
She has saved $1,515 each quarter and earned an average rate of return of 9 percent.
How much money does she currently have saved for this purpose?

Question 8
1. How many years it will take you to double your money if you can earn 13% each year,
given that compounding is quarterly? Note: Do not write "years" in your answer. Simply
write the number in the answer box.

Question 9
1. Assume interest rate of 5%. A company receives cash flows of $106,444 at the end of
years 4, 5, 6, 7, and 8, and cash flows of $297,138 at the end of year 10. Compute the
future value of this cash flow stream.
Do not enter the symbol $ in your answer. Simply enter the answer rounded off to two decimal
points.

Question 10
1. What is the future value of $632 invested for 12 years at 10% if interest is compounded
quarterly? Note: Do not put $ sign in your answer. Simply write the number in the answer
box.

Question 11
1. If the effective rate is 12%. What is the nominal rate if compounding is daily. Do not
enter the symbol % in your answer. Simply enter the answer in percentages rounded off
to two decimal points.

Question 12
1. Today, you are purchasing a $3,881 10-year car loan at 13 percent. You will pay annually
at the end of each year. What is the amount of each payment?

Question 13
1. What is the future value of $10,360 for 14 years at 7 percent if interest is compounded
semi-annually? Note: Do not enter "$" in your answer. Simply write down the number
that you get as your answer.

Question 14
1. Gertrude Carter and Co. has an outstanding loan that calls for equal annual payments of
$14,903 over the 10-year life of the loan. The original loan amount was $100,000 at an
APR of 8 percent. How much of the third payment is interest?
Do not enter the symbol $ in your answer. Simply enter the answer rounded off to two decimal
points.

Question 15
1. In order to buy a house, you take a loan of 100,000 at 7.5% for a period of 13 years.
Compute the balance remaining at the end of 5 years.
Do not enter the symbol $ in your answer. Enter your answer as a positive number. Simply enter
the answer rounded off to two decimal points.

Question 16
1. How much do you need to invest today in order to have $8,048 at the end of 6 years if
you are sure to earn an interest at the rate of 8%, if interest is compounded quarterly?
Note: Do not put $ sign in your answer. Simply write the number in the answer box.

Question 17
1. How much do you need to invest today in order to have $10,016 at the end of 13 years if
you are sure to earn an interest at the rate of 4%? Note: Do not put $ sign in your
answer. Simply write the number in the answer box.

Question 18
Say, you deposit $2,035 in a bank for 15 years. What is the amount you will have in the bank
at the end of 15 years if interest of 5 % compounded monthly for first 7 years and interest of

10 % compounded quarterly for the remaining years? Note: Do not put $ sign in your
answer. Simply write the number in the answer box.

Question 19
1. What is the future value of $4,515 invested for 18 years at 19% if interest is
compounded semi-annually? Note: Do not put $ sign in your answer. Simply write the
number in the answer box.

Question 20
1. Barrett Pharmaceuticals is considering a drug project that costs $177,695 today and is
expected to generate end-of-year annual cash flows of $14,677, forever. At what
discount rate would Barrett be indifferent between accepting and rejecting the project?
Just enter the number in percentages up to 2 decimal points. Do not enter % in the answer box.

Question 21
1. How many years it will take you to quadruple (means 4 times) your money if you can
earn 7.14% each year? Note: Do not write "years" in your answer. Simply write the
number in the answer box.

1 points
Question 22
1. What is the future value of $4,195 invested for 14 years at 13% if interest is
compounded semi-annually (twice a year)? Note: Do not put $ sign in your answer.
Simply write the number in the answer box.

Question 23
1. Assume interest rate of 6%. Suppose that you receive $97,408 at the end of each year
for 4 years. Suppose that this cash flow starts at the end of the fourth year. Compute the
present value.
Do not enter the symbol $ in your answer. Simply enter the answer rounded off to two decimal
points.

Question 24
1.
Say, you deposit $4,381 in a bank for 16 years. What is the amount you will have in the
bank at the end of 16 years if interest of 4 % for first 7 years and interest of 6 % for the
remaining years? Note: Do not put $ sign in your answer. Simply write the number in the
answer box.

Question 25
1. If you can triple your money in 20 years, what is the implied rate of interest? Note: Do
not put % sign in your answer. Simply write the number in percentages in the answer
box..

Question 26
1. What is the effective rate of 16% compounded monthly?
Do not enter the symbol % in your answer. Simply enter the answer in percentages rounded off
to two decimal points.

Question 27
1. How much do you need to invest today in order to have $1,829 at the end of 7 years if
you are sure to earn an interest at the rate of 14%, if interest is compounded monthly?
Note: Do not put $ sign in your answer. Simply write the number in the answer box.

Question 28
1. The ABC Company is considering a new project which will require an initial cash
investment of $12,842. The projected cash flows for years 1 through 4 are $6,128,
$5,264, $8,811, and $4,632, respectively. If the appropriate discount rate is 12%,
compute the NPV of the project.
Enter your answer rounded off to two decimal points. Do not enter $ in the answer box.

Question 29

1. The Perpetual Life Insurance Co is trying to sell you an investment policy that will pay
you and your heirs $14,536 per year forever. Suppose the Perpetual Life Insurance Co.
told you the policy costs $169,503. At what interest rate would this be a fair deal? Just
enter the number in percentages up to 2 decimal points. Do not enter % in the answer
box.

Question 30
1. How many months it will take to grow your money from $3,711 to $6,515 if you can earn
an interest of 19% compounded monthly? Note: Do not write "months" in your answer.
Simply write the number in the answer box.

Question 31
1. How many years it will take to grow your money from $4,118 to $6,536 if you can earn
an interest of 6% compounded monthly? Note: Do not write "years" in your answer.
Simply write the number in the answer box.

Question 32
1. If you receive $274 at the end of each year for the first three years and $956 at the end
of each year for the next three years. What is the present value? Assume interest rate is
7%.
Hint: This is an uneven cash flow problem. Use the CF function and solve for NPV to get the
answer.
Just enter the number up to 2 decimal points. Do not enter $ in the answer box.

Question 33
1. Consider a 10-year loan with monthly payments at 10%. If the loan amount is $250,000,
compute the Interest paid during the 6th year.
Enter your answer rounded off to two decimal points. Do not enter $ in the answer box.

Question 34

1. Assume interest rate of 4%. A company receives cash flows of $559 at the end of year 5,
$242 at the end of year 7, and $962 at the end of year 10. Compute the future value of
this cash flow stream.
Do not enter the symbol $ in your answer. Simply enter the answer rounded off to two decimal
points.

Question 35
1. If you put $700 in a savings account with a 10% nominal rate of interest compounded
monthly, what will the investment be worth in 21 months (round to the nearest dollar)?
a. $828
b. $770
c. $833
d. $1,17
6
e. $827
Question 36
1. The ABC Company is considering a new project which will require an initial cash
investment of $5,268. The project will produce no cash flows for the first 5 years. The
projected cash flows for years 6 through 9 are $6,362, $4,627, $4,076, and $6,748,
respectively. If the appropriate discount rate is 4%, compute the NPV of the project.