Financial Management Assignment December 13, 2021

1. Jose now has $500. How much would he have after 6 years if he leaves it invested at 5.5% with
annual compounding?
a. $591.09
b. $622.20
c. $654.95
d. $689.42
e. $723.89

2. Suppose you have $1,500 and plan to purchase a 5-year certificate of deposit (CD) that pays
3.5% interest, compounded annually. How much will you have when the CD matures?
a. $1,781.53
b. $1,870.61
c. $1,964.14
d. $2,062.34
e. $2,165.46

3. Suppose you have $2,000 and plan to purchase a 10-year certificate of deposit (CD) that pays
6.5% interest, compounded annually. How much will you have when the CD matures?
a. $3,754.27
b. $3,941.99
c. $4,139.09
d. $4,346.04
e. $4,563.34

4. Suppose a State of New York bond will pay $1,000 ten years from now. If the going interest rate
on these 10-year bonds is 5.5%, how much is the bond worth today?
a. $585.43
b. $614.70
c. $645.44
d. $677.71
e. $711.59

5. Suppose a State of California bond will pay $1,000 eight years from now. If the going interest
rate on these 8-year bonds is 5.5%, how much is the bond worth today?
a. $651.60
b. $684.18
c. $718.39
d. $754.31
e. $792.02
6. How much would $20,000 due in 50 years be worth today if the discount rate were 7.5%?
a. $438.03
b. $461.08
c. $485.35
d. $510.89
e. $537.78

7. Suppose the U.S. Treasury offers to sell you a bond for $747.25. No payments will be made until
the bond matures 5 years from now, at which time it will be redeemed for $1,000. What interest rate
would you earn if you bought this bond at the offer price?
a. 4.37%
b. 4.86%
c. 5.40%
d. 6.00%
e. 6.60%

8. Suppose the U.S. Treasury offers to sell you a bond for $3,000. No payments will be made until
the bond matures 10 years from now, at which time it will be redeemed for $5,000. What interest rate
would you earn if you bought this bond at the offer price?
a. 3.82%
b. 4.25%
c. 4.72%
d. 5.24%
e. 5.77%

9. Ten years ago, Lucas Inc. earned $0.50 per share. Its earnings this year were $2.20. What was
the growth rate in earnings per share (EPS) over the 10-year period?
a. 15.17%
b. 15.97%
c. 16.77%
d. 17.61%
e. 18.49%

10. Five years ago, Weed Go Inc. earned $1.50 per share. Its earnings this year were $3.20. What
was the growth rate in earnings per share (EPS) over the 5-year period?
a. 15.54%
b. 16.36%
c. 17.18%
d. 18.04%
e. 18.94%
11. Janice has $5,000 invested in a bank that pays 3.8% annually. How long will it take for her funds
to triple?
a. 23.99
b. 25.26
c. 26.58
d. 27.98
e. 29.46

12. Bob has $2,500 invested in a bank that pays 4% annually. How long will it take for his funds to
double?
a. 14.39
b. 15.15
c. 15.95
d. 16.79
e. 17.67

13. You want to buy a new sports car 3 years from now, and you plan to save $4,200 per year,
beginning one year from today. You will deposit your savings in an account that pays 5.2% interest.
How much will you have just after you make the 3rd deposit, 3 years from now?
a. $11,973
b. $12,603
c. $13,267
d. $13,930
e. $14,626

14. You want to buy a new ski boat 2 years from now, and you plan to save $8,200 per year,
beginning one year from today. You will deposit your savings in an account that pays 6.2% interest.
How much will you have just after you make the 2nd deposit, 2 years from now?
a. $15,260
b. $16,063
c. $16,908
d. $17,754
e. $18,642

15. You want to quit your job and go back to school for a law degree 4 years from now, and you plan
to save $3,500 per year, beginning immediately. You will make 4 deposits in an account that pays 5.7%
interest. Under these assumptions, how much will you have 4 years from today?
a. $16,112
b. $16,918
c. $17,763
d. $18,652
e. $19,584
16. You want to quit your job and return to school for an MBA degree 3 years from now, and you
plan to save $7,000 per year, beginning immediately. You will make 3 deposits in an account that pays
5.2% interest. Under these assumptions, how much will you have 3 years from today?
a. $20,993
b. $22,098
c. $23,261
d. $24,424
e. $25,645

17. What is the PV of an ordinary annuity with 10 payments of $2,700 if the appropriate interest
rate is 5.5%?
a. $16,576
b. $17,449
c. $18,367
d. $19,334
e. $20,352

18. What is the PV of an ordinary annuity with 5 payments of $4,700 if the appropriate interest rate
is 4.5%?
a. $16,806
b. $17,690
c. $18,621
d. $19,601
e. $20,633

19. Suppose you inherited $275,000 and invested it at 8.25% per year. How much could you
withdraw at the end of each of the next 20 years?
a. $28,532
b. $29,959
c. $31,457
d. $33,030
e. $34,681

20. Your uncle has $375,000 and wants to retire. He expects to live for another 25 years and to earn
7.5% on his invested funds. How much could he withdraw at the end of each of the next 25 years and
end up with zero in the account?
a. $28,843.38
b. $30,361.46
c. $31,959.43
d. $33,641.50
e. $35,323.58