FINANCE 101 – QUIZ 2: REVIEW PROBLEMS
1. Ten years ago today, you deposited $8,520 in an account that pays 4% compounded
annually. If you left that money in the account and reinvested all the interest, it would
2. You bought a security that will pay you $150,000 5 years from now. If the annual rate of
return you can obtain is 5 ½%, what would be the value of this annuity today?
3. You are considering the purchase of a house and the asking price is $225,000, which
requires a 10% down payment. If you can obtain a mortgage for 4 ¾, over 25 years, with
monthly payments, how much would your monthly payment be?
4. You can afford $250 per month for a new car. If you can obtain a loan at an interest rate
of 6 ½%, over 72 months, what is the maximum you can borrow?
5. You’ve just landed your first job and you have plans to begin a retirement account by
depositing $500 per month into an account that will yield 8% per year. If you continue to
save this amount for 40 years, how much will you have when you retire?
6. You will receive a single payment of $30,000, 10 years from now. If the present value is
$18,300, what is the appropriate discount rate?
7. Berkshire Hathaway stock sold for $3,000 per share twenty years ago. If it currently sells
for $125,000, what was the rate of return for the last 20 years?
8. An annuity pays $2,000 every quarter for twenty years. The annual interest rate is 6%,
compounded quarterly. The present value of the annuity to the nearest dollar is?
9. The rate of interest agreed upon contractually charged by a lender or promised by a
borrower is the _________ interest rate.
10. The rate of interest actually paid or earned, also call the annual percentage rate (APR), is
the _____________ interest rate.