UMUC FINC 330 Midterm with Answers

UMUC FINC 330 Midterm with Answers

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1. If you invest $27,140  today at an interest rate of 8.17 percent, compounded daily, how much money will you have in your savings account in 25 years?

2. Stephen plans to purchase a car 4 years from now. The car will cost $46,460 at that time. Assume that Stephen can earn 4.79 percent (compounded monthly) on his money. How much should he set aside today for the purchase?

3. You have decided to place $229 in equal deposits every month at the beginning of the month into a savings account earning 10.97 percent per year, compounded monthly for the next 7 years. The first deposit is made today. How much money will be in the account at the end of that time period?

4. Assume that the inflation rate during the last year was 1.03 percent. US government T-bills had the nominal rates of return of 5.87 percent. What is the real rate of return for a T-bill?

5. You are given an investment to analyze. The cash flows from this investment are

6. Cooling Tools, Inc. is currently producing 1,164 of small refrigerators per month but the company’s CEO plans to increase production at a rate of 9.98 percent per month until the firm is producing 5,486 of refrigerators per month. How many months will this take?

7. You have been offered the opportunity to invest in a project that will pay $3,623 per year at the end of years one through three and $7,576 per year at the end of years four and five. These cash flows will be placed in a saving account that pays 14.66 percent per year. What is the future value of this cash flow pattern at the end of year five?

8. A firm's dividends have grown over the last several years. 3 years ago the firm paid a dividend of $2. Yesterday it paid a dividend of $4. What was the average annual growth rate of dividends for this firm?

9. What is the accumulated sum of the following stream of payments?
$2,318 every year at the end of the year for 10 years at 4.77 percent, compounded annually.

10. A commercial bank will loan you $52,285 for 8 years to buy a car. The loan must be repaid in equal monthly payments at the end of the month. The annual interest rate on the loan is 5.19 percent of the unpaid balance. What is the amount of the monthly payments?

11. You need to accumulate $82,017 for your son's education. You have decided to place equal year-end deposits in a savings account for the next 9 years. The savings account pays 14.20 percent per year, compounded annually.  How much will each annual payment be?

12. What is the present value of the following annuity?
$1,875 every quarter year at the end of the quarter for the next 9 years, discounted back to the present at 4.64 percent per year, compounded quarterly?\

13. What is the present value of a $257 perpetuity discounted back to the present at 10.36 percent.

14. What is the present value of the following future amount?
$452,621,  to be received 20 years from now, discounted back to the present at 7 percent, compounded annually.

15. You have accumulated some money for your retirement. You are going to withdraw $96,727 every year at the end of the year for the next 25 years. How much money have you accumulated for your retirement? Your account pays you 6.71 percent per year, compounded annually. To answer this question, you have tofind the present value of these cash flows.

16. What is the future value in 23 years of an ordinary annuity cash flow of $637 every quarter of a year at the end of the period, at an annual interest rate of 10.44 percent per year, compounded quarterly?

17. To what amount will the following investment accumulate?

18. You are considering an investment that has a nominal annual interest rate of 7.15 percent, compounded semiannually. Therefore, the effective annual rate, or EAR (annual percentage yield) is _____.