Unit 3
assessment
Question 1 After placing $13,000 in a savings account paying
annual compound interest of 3%, Leona will accumulate what amount if she leaves
the money in the bank for 4 years?
Question 2 What is the future value of $500 a year for 9
years compounded annually at 10%? What is the future value of $900 for nine
years compounded annually at 10%?
Question 3 To pay for your education, you have taken out
$28,000 in student loans. If you make monthly payments over 13 years at 5%
compounded monthly, how much are your monthly student loan payments?
Question 4 What is the present value of a perpetual stream
of cash flow that pays $80,000 at the end of one year and grows at a rate of 5%
indefinitely? The rate of interest used to discount the cash flows is 10%. What
is the present value of the growing perpetuity?
Question 5 You are given three investment alternatives to
analyze. The cash flows from these three investments are as follows:
Investment table
What is the present value of investments A, B, and C if the
appropriate discount rate is 10%?
