Economics Assignment

Question 1

One plan to raise money for Texas schools involves an "enrichment tax" that could collect $56 for every student in a certain school district. If there are 50,000 students in the district and the cash flow begins 2 years from now, what is the present worth of the enrichment plan over a 5-year planning period at an interest rate of 8% per year?

a) $8.124 million

b) $8.671 million

c) $8.587 million

d) $7.993 million

Question 2

How much money would you have to pay each year in 8 equal payments, starting 2 years from today, to repay a $20,000 loan received from a relative today, if the interest rate is 8% per year?

a) $3775.44

b) $3800.95

c) $3698.61

d) $3758.62

Question 3

An industrial engineer is planning for his early retirement 25 years from now. He believes he can comfortably set aside $10,000 each year starting now. If he plans to start withdrawing money 1 year after he makes his last deposit (i.e., year 26), what uniform amount could he withdraw each year for 30 years, if the account earns interest at a rate of 8% per year?

a) $69,666

b) $63,492

c) $65,110

d) $71,023

Question 4

Lifetime savings accounts, known as LSAs, would allow people to invest after-tax money without being taxed on any of the gains. If an engineer invests $10,000 now and $10,000 each year for the next 20 years, how much will be in the account immediately after the last deposit if the account grows by 15% per year?

a) F = $1,255,131

b) F = $1,188,101

c) F = $571,000

d) F = $1,528,377

Question 5

By spending $10,000 now and $25,000 three years from now, a plating company can increase its income in years 4 through 10. At an interest rate of 12% per year, how much extra income per year would be needed in years 4 through 10 to recover the investment?

a) A = $6000.95

b) A = $8556.42

c) A = $10,978.39

d) A = $18,655.42

Question 6

Compute the present worth (year 0) of the following cash flows at i = 12% per year.

a) P = $11,198

b) P = $11,150

c) P = $10,150

d) P = $10,198

Question 7

When a uniform series begins at a time other than the end of period 1, it is called a ________ series.

a) automatic

b) autonomous

c) shifted

d) uniform

Question 8

The present worth is always located __________ prior to the first uniform-series amount when using the P/A factor.

a) three periods

b) zero periods

c) two periods

d) one period

Question 9

For an interest rate of 10% per year compounded quarterly, determine the number of times interest would be compounded
(a) per quarter,
(b) per year, and
(c) per 3 years.

a) (a) 12
(b) 4
(c) 1

b) (a) 4
(b) 1
(c) 12

c) (a) 1
(b) 4
(c) 6

d) (a) 1
(b) 4
(c) 12

Question 10

An interest rate of 16% per year, compounded quarterly, is equivalent to what effective interest rate per year?

a) i = 16.59%

b) i = 16.99%

c) i = 16.89%

d) i = 16.79%

Question 11

What effective interest rate per year is equivalent to an effective 18% per year, compounded semiannually?

a) 18.0%

b) 18.1%

c) 18.7%

d) 18.3%

Question 12

Determine the P/G factor for 5 years at an effective interest rate of 6% per year, compounded semiannually.

a) 7.9345

b) 4.9455

c) 4.2124

d) 1.8836

Question 13

A present sum of $5000 at an interest rate of 8% per year, compounded semiannually, is equivalent to how much money 8 years ago?

a) $2669.50

b) $2644.50

c) $2691.25

d) $2680.15

Question 14

A 40-day strike at Boeing resulted in 50 fewer deliveries of commercial jetliners at the end of the first quarter of 2000. At a cost of $20 million per plane, what was the equivalent end-of-year cost of the strike (i.e., end of fourth quarter) at an interest rate of 18% per year, compounded monthly?

a) $2.505 billion

b) $1.209 billion

c) $1.1434 billion

d) $2.225 billion

Question 15

An engineer deposits $300 per month into a savings account that pays interest at a rate of 6% per year, compounded semiannually. How much will be in the account at the end of 15 years? Assume no interperiod compounding.

a) $77,575

b) $79,992

c) $85,636

d) $82,086