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Extra FINANCE 101 – QUIZ


									           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
   be worth?

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.

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