1. At an interest rate of 2 % per month, money will double in value in how many months? (A) 20 months (B) 22 months (C) 24 months (D) 35 months
2. A manufacturer purchased $15,000 worth of equipment with a useful life of six years and a $2000 salvage value at the end of the six years. Assuming a 12 % interest rate, the equivalent uniform annual cost (EUAC) is nearest to: (A) $1500 (B) $2500 (C) $3500 (D) $4500
3. Consider a machine as follows: Initial cost: $80,000 End-of-useful-life salvage value: $20,000 Annual operating cost: $18,000 Useful life: 20 years Based on 10 % interest, the equivalent uniform annual cost for the machine is closest to: (A) $21,000 (B) $23,000 (C) $25,000 (D) $27,000
4. A project will cost $50,000. The benefits at the end of the first year are estimated to be $10,000, increasing $1000 per year in subsequent years. Assuming a 12 % interest rate, no salvage value, and an eight-year analysis period, the benefit-cost ratio is closest to: (A) 0.78 (B) 1.00 (C) 1.28 (D) 1.45
5. A piece of property is purchased for $10,000 and yields a $1000 yearly profit. If the property is sold after five years, the minimum price to break even, with interest at 6 %, is closest to: 3. account paying monthly interest. If the account now has $320.52, the effective annual interest rate is nearest to: A deposit of $300 was made one year ago into an (A) 7 % (B) 10 % (C) 12 % (D) 15 %
6. An individual wishes to deposit a certain quantity of money so that he will have $500 at the end of five years. With interest at 4 % per year, compounded semiannually, the amount of the deposit is nearest to: (A) $340 (B) $400 (C) $410 (D) $416
7. An investor is considering buying a 20-year corporate bond. The bond has a face value of $1000 and pays 6 % interest per year in two semiannual payments. Thus the purchaser of the bond will receive $30 every six months, and in addition he will receive $1000 at the end of 20 years, along with the last $30 interest payment. If the investor believes he should receive 8 % annual interest, compounded semiannually, the amount he is willing to pay up for the bond (bond value) is closest to: (A) $500 (B) $600 (C) $700 (D) $800
8. A person borrows $5000 at an interest rate of 18 %, compounded monthly. Monthly payments of $167.10 are agreed upon. The length of the loan is closest to: (A) 12 months (B) 20 months (C) 24 months (D) 40 months (A) $5,000 (B) $6,500 (C) $7,700 (D) $8,300
9. An automobile costs $20,000 today. You can earn 12 % tax-free on an auto-purchase account. If you expect the cost of the auto to increase by 10 % per year, the amount you would need to deposit in the account to provide for the purchase of the auto five years from now is closest to: (A) $12,000 (B) $14,000 (C) $16,000 (D) $18,000