Your sister assumes that she will accumulate around $5.5 million dollars. How much can she spend each year (for 25 years) after she retires? Her first withdrawal will be made at the end of her first retirement year and the balance that is not spent during the year continues to earn 7.5%. a. $493,408 b. $602,396 c. $567,930 d. $556,562 e. $539,865 Farmers Bank offers to lend you $50,000 at a nominal rate of 5.0%, interest, with interest paid quarterly. Merchants Bank offers to lend you the $50,000, but it will charge 6.8%, interest, with interest paid annually at the end of the year. What's the difference in the effective annual rates charged by the two banks? a. b. c. d. e. 2.07% 2.00% 1.93% 1.70% 2.12% (TRUE or FALSE) In question 23, you would select the loan from Merchants Bank. Although the interest rate is higher than the rate offered by Farmers Bank, the effective annual rate is lower. Your child's orthodontist offers you two alternative payment plans. The first plan requires a $4,000 immediate up-front payment. The second plan requires you to make monthly payments of $137.41, payable at the end of each month for 3 years. What nominal annual interest rate is built into the monthly payment plan? b. C. d. e. 17.81% 19.60% 14.35% 13.50% 11.34% (TRUE or FALSE) One of the four most fundamental factors that affect the cost of money as discussed in the text is the expected rate of inflation. If inflation is expected to be relatively high, then interest rates will tend to be relatively high, other things held constant. (TRUE or FALSE) The four most fundamental factors that affect the cost of money are (1) production opportunities, (2) time preferences for consumption, (3) risk, and (4) inflation