Finance Problems

Question 1 of 10
The Friendly Bank wants to earn an effective annual return on its consumer loans of 12 percent per year. The bank uses daily compounding. What rate is the bank most apt to quote on these loans?
A. 11.76 percent
B. 11.38 percent
C. 11.33 percent
D. 12.12 percent
E. 12.00 percent

Question 2 of 10
You have just purchased a new warehouse. To finance the purchase, you arranged for a 30-year mortgage loan for 65 percent of the $2.5 million purchase price. The monthly payment on this loan will be $10,400. What is the effective annual rate on this loan?
A. 6.82 percent
B. 6.25 percent
C. 6.46 percent
D. 7.01 percent
E. 7.27 percent

Question 3 of 10
You have your choice of two investment accounts. Investment A is a five-year annuity that features end-of-month $2,500 payments and has an interest rate of 11.5 percent compounded monthly. Investment B is a 10.5 percent continuously compounded lump sum investment, also good for five years. How much would you need to invest in B today for it to be worth as much as investment A five years from now?
A. $108,206.67
B. $119,176.06
C. $124,318.08
D. $129,407.17
E. $131,008.15

Question 4 of 10
One year ago, JK Mfg. deposited $20,500 in an investment account for the purpose of buying new equipment four years from today. Today, it is adding another $15,000 to this account. The company plans on making a final deposit of $10,000 to the account one year from today. How much will be available when it is ready to buy the equipment, assuming the account pays 3.5 interest?
A. $53,408
B. $53,919
C. $56,211
D. $52,648
E. $58,021

Question 5 of 10
Troy will receive $7,500 at the end of year 2. At the end of the following two years, he will receive $9,000 and $12,500, respectively. What is the future value of these cash flows at the end of year 5 if the interest rate is 8 percent?
A. $38,418
B. $32,907
C. $33,445
D. $36,411
E. $35,255

Question 6 of 10
Sue plans to save $4,500, $0, and $5,500 at the end of each of the next three years, respectively. What will her investment account be worth at the end of the third year if she earns an annual rate of 4.15 percent?
A. $10,528.12
B. $10,381.25
C. $9,907.11
D. $11,526.50
E. $10,812.07

Question 7 of 10
A wealthy benefactor just contributed to your college’s scholarship program. This gift will provide $20,000 in scholarships next year with that amount increasing by 2 percent annually thereafter. If the discount rate is 6.5 percent, what is the current value of this perpetual gift?
A. $307,700
B. $350,000
C. $525,000
D. $444,444
E. $550,750

Question 8 of 10
A preferred stock pays an annual dividend of $4.10. What is one share of this stock worth today if the rate of return is 9.68 percent?
A. $41.48
B. $41.18
C. $42.36
D. $39.87
E. $42.90

Question 9 of 10
You just paid $750,000 for an annuity that will pay you and your heirs $36,000 a year forever. What rate of return are you earning on this policy?
A. 4.75 percent
B. 5.10 percent
C. 5.33 percent
D. 4.80 percent
E. 4.72 percent

Question 10 of 10
DLM preferred stock has a 5.8 percent dividend yield. The stock is currently priced at $36.20 per share. What is the amount of the annual dividend?
A. $2.30
B. $2.35
C. $2.40
D. $2.10
E. $1.90