Payments are made at the end of each calendar month. The loan has a fixed annual rate of 5.0% (or 5.0%/12 per month). Approximately how much is each payment?
a. $833
b. $875
c. $1,610
d. $1,626
e. $1,729
How many years and months will it take to have accumulated at least $200,000 of equity in your home?
a. 8 years and 4 months
b. 9 years and 0 months
c. 9 years and 1 month
d. 15 years and 1 month
e. 15 years and 2 months
Use the following information about Company X to help answer problems 18-20:
Next Year T=1, you will deposit $258.75 in a savings account. You will increase the amount you deposit each year by a constant growth rate (g) for each of the next 3 years so that at the end of year 4 (T=4) you will make a deposit of $393.53.
IME CFs:
$258.75
$2
$393.53
The appropriate discount rate is 8.0% (also the rate of interest you earn on your savings per year)
18. The deposit you will make at the end of year 3 (T=3) is closest to:
a. $302
b. $326
c. $342
d. $346
e. $364
19. Based on discount factors, a cash flow of $1.00 two years from now (T=2)
a. is worth 16.64% less than a $1.00 cash flow received today (T=0)
b. is worth 14.27% less than a $1.00 cash flow received today (T=0)
c. is worth 13.04% less than a $1.00 cash flow received today (T=0)
d. is worth 85.73% more than a $1.00 cash flow received today (T=0)
e. is worth 86.96% more than a $1.00 cash flow received today (T=0)
20. The $258.75 deposit you made at the end of year 1 (T=1) has a future value closest to the end of year 4 (T=4) at:
a. $317
b. $326
c. $352
d. $394
e. $453
