# All Constructions, Inc. is planning on constructing

All Constructions, Inc. is planning on constructing

1. All Constructions, Inc. is planning on constructing a new facility. The company plans to pay 20%
of the cost in cash and finance the balance. If the company can afford monthly payments of
\$128,740 for 30 years and the prevailing interest rate on mortgages is 8% compounded monthly,
how much can the company spend (approximately) on the new facility?
Select one:
a. \$30 million.
b. None of the above.
c. \$20 million.
d. \$21.9 million.
e. \$26.8 million.
f. \$24.2 million.
2. Assuming an annual interest rate of 8%, what is the future value of the following annual cash
flows at the end of four years from now? Year 0, CF0=-800; Year 1, CF1=100; Year 2, CF2=300;
Year 3, CF3=500; Year 4, CF4=700
Select one:
a. \$627.50.
b. \$721.08.
c. \$574.82.
d. \$676.20.
e. \$686.77.
f. None of the above.
3. At a 10% annual rate of return you will triple your original investment in approximately ___
years.
Select one:
a. 8.
b. 12.
c. None of the above.
d. 24.
e. 19.
f. 18.
4.If you deposit \$10,000 at the end of each six months into an account that earns interest at a
rate of 8% compounded semi-annually, how much will be in the account in five years?
Select one:
a. \$33,998.29.
b. \$28,331.91.
c. None of the above.
d. \$22,034.60.
e. \$28,991.87.
f. \$120,061.07.
5. If you wish to accumulate \$150,000 in 15 years, how much must you deposit today in an
account that pays an effective annual rate of 8%?
Select one:
a. \$16,628.25.
b. \$84,482.16.
c. \$17,534.50.
d. \$14,864.36.
e. \$47,286.26.
f. None of the above.
6. Jeff invests \$3,000 in an account that pays 9% simple interest. How much more could he have

earned over a 20-year period if the interest had compounded annually?
Select one:
a. \$4,409.05.
b. \$7,348.42.
c. None of the above.
d. \$10,287.79.
e. \$8,032.30.
f. \$8,413.23.
7. Moe and Joe are twins. Moe invested \$1,000, earned 9% annually, and now has \$1,411.58. Joe
invested \$1,000, earned 6.47%, and now has \$1,992.97. Joe invested his money _____ years
before Moe.
Select one:
a. 7.
b. 3.
c. 1.
d. 9.
e. None of the above.
f. 4.
8. Ronald has a mortgage with a current balance owing of \$150,000. He has 250 monthly
payments left to make, and his bank is charging interest at a rate of 7% compounded semiannually. Which of the following is the best estimate of Ronaldâs payments?
Select one:
a. \$962.25.
b. \$872.41.
c. \$1,283.54.
d. None of the above.
e. \$1,132.64.
f. \$882.65.
9. What is the maximum you would be willing to pay for an annuity that provides an 8.25% rate
of return by paying \$500 at the beginning of each year for 10 years? (Round to the nearest \$1)
Select one:
a. None of the above.
b. \$6,935.
c. \$7,183.
d. \$6,683.
e. \$3,591.
f. \$3,467.
10. Your cousin offers you a \$10,000 loan and requires you to pay \$10,100 at the end of the
month, what is the EAR on her loan to you?
Select one:
a. 34.49%.
b. 12.68%.
c. 79.59%.
d. 62.33%.
e. None of the above.
f. 213.84%.

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