Question: 9. One bank will pay you 5.4% interest compounded annually. If you invest $1000 today, what simple interest rate would you need to earn at

9. One bank will pay you 5.4% interest compounded annually. If you invest $1000 today, what simple interest rate would you need to earn at a competing bank to have the same amount of money in 5 years? A. 5.7% B. 6.0% C. 6.4% D. 6.7% E. 7.0%

10. One perpetuity pays $1000 per year and starts in 1 year. Another perpetuity pays $1000 per year and starts in 5 years. Whats the difference in the present values of the two perpetuities today if the discount rate is 10%? A. $3012 B. $3170 C. $3487 D. $3566 E. $3791

11. An account was opened with $1,000 10 years ago. Today, the account balance is $1,800. If the account paid interest compounded semiannually, how much interest on interest was earned? A. $219.20 B. $212.27 C. $203.49 D. $198.78 E. $194.60

12. If a bank offers to pay you a 3% APR compounded continuously, how much do you need to deposit today to have $10,000 in 20 years? A. $5212 B. $5384 C. $5488 D. $5520 E. $5537

13. You buy a car today for $27,000. If you finance it with a 6% APR, 4 year loan, what will your monthly payments be? Assume monthly compounding.A. $692 B. $681 C. $658 D. $634E. $603

14. You buy a car today for $27,000. If you finance it with a 6% APR, 4 year loan, what is the difference in your payments if you agree to pay at the beginning of each month rather than at the end? Assume monthly compounding.A. $3.15 B. $3.39 C. $3.77 D. $3.87E. $3.98

15. You are saving to buy a car. You can save $200 per month and would like to buy the car in 4 years. How much more car can you afford if you make your deposits at the beginning of each month rather than at the end? Use 6% APR with monthly compounding.A. $41 B. $44 C. $54 D. $57 E. $64

16. An investment will pay you $4000 each year for the next 8 years. The investment yields 6% APR, compounded quarterly. How much is the investment worth in 8 years?A. $37,723 C. $39,590 E. $40,440B. $38,600 D. $39,784Important information: In any of the relationship concept questions below, assume all other variables stay the same

17. From our discussion/notes/you working problems, which of these is true? I. the difference between a perpetuity and a perpetuity due is one payment II. the difference between an annuity and an annuity due is one period of interest A. I only C. I and II B. II only D. neither is true

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