7、If an investor puts $5,724/year, starting at the end of the first year, in an account earning 8 percent and ends up accumulating $500,000, how many years did it take the investor?

A)   87 years.

B)   26 years.

C)   27 years.

D)   32 years.

A)   $924,423.70.

B)   $855,947.87.

C)   $1,500,000.00.

D)   $1,080,000.00.

A)   $900.

B)   $1,100.

C)   $1,000.

D)   No solution.

A)   $159,374.

B)   $175,312.

C)   $152,500.

D)   $110.000.

A)   $38,676.

B)   $36,577.

C)   $23,857.

D)   $41,577.

A)   $95,815.74.

B)   $87,105.21.

C)   $169,743.42.

D)   $154,312.20.

答案和详解如下：

7、If an investor puts $5,724/year, starting at the end of the first year, in an account earning 8 percent and ends up accumulating $500,000, how many years did it take the investor?

A)   87 years.

B)   26 years.

C)   27 years.

D)   32 years.

The correct answer was C)

I/Y = 8; PMT = -5,724; FV = 500,000; CPT N = 27.

Remember, you must put the pmt in as a negative (cash out) and the FV in as a positive (cash in) to compute either N or I/Y.

8、Justin Banks just won the lottery and is trying to decide between the annual cash flow payment option or the lump sum option. He can earn 8 percent at the bank and the annual cash flow option is $100,000/year, beginning today for 15 years. What is the annual cash flow option worth to Banks today?

A)   $924,423.70.

B)   $855,947.87.

C)   $1,500,000.00.

D)   $1,080,000.00.

The correct answer was A)

First put your calculator in the BGN.

N=15; I/Y=8; PMT=100,000; CPT PV = 924,423.70.

Alternatively, do not set your calculator to BGN, simply multiply the ordinary annuity (end of the period payments) answer by 1+I/Y. You get the annuity due answer and you don’t run the risk of forgetting to reset your calculator back to the end of the period setting.

OR N=14; I/Y=8; PMT=100,000; CPT PV=824,423.70+100,000=924,423.70.

9、What is the present value of a 10-year, $100 annual annuity due if interest rates are 0 percent?

A)   $900.

B)   $1,100.

C)   $1,000.

D)   No solution.

The correct answer was C)

When I/Y=0 you just sum up the numbers since there is no interest earned.

10、Consider a 10-year annuity that promises to pay out $10,000 per year; given this is an ordinary annuity and that an investor can earn 10 percent on her money, the future value of this annuity, at the end of 10 years, would be:

A)   $159,374.

B)   $175,312.

C)   $152,500.

D)   $110.000.

The correct answer was A)

N=10; I/Y=10; PMT=-10,000; PV=0; CPT

FV=$159,374.

11、What is the present value of a 12-year annuity due that pays $5,000 per year, given a discount rate of 7.5 percent?

A)   $38,676.

B)   $36,577.

C)   $23,857.

D)   $41,577.

The correct answer was D)

Using your calculator: N=11; I/Y=7.5; PMT=-5,000; FV=0; CPT PV=36,577+5,000=$41,577. Or set your calculator to BGN mode and N=12; I/Y=7.5; PMT=-5,000; FV=0; CPT PV=$41,577.

12、Bill Jones is creating a charitable trust to provide six annual payments of $20,000 each, beginning next year. How much must Jones set aside now at 10 percent interest compounded annually to meet the required disbursements?

A)   $95,815.74.

B)   $87,105.21.

C)   $169,743.42.

D)   $154,312.20.

The correct answer was B)     

n = 6, PMT = -$20,000, i/yr = 10%, FV = 0, Compute PV = $87,105.21