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problem 1: Your father has $500,000 invested at 8%, and he now wants to retire. He wants to withdraw $50,000 at the starting of each year, beginning instantly. How many years will it take to exhaust his funds, that is, run the account down to zero?

a) 11.34 years
b) 18.49 years
c) 17.54 years
d) 13.91 years
e) 15.27 years

problem 2: What is the present value of a 6-year ordinary annuity of $1,000 per year plus an additional $1,500 at the end of Year 6 if the interest rate is 6%?

a) $5,324.89
b) $5,591.45
c) $5,974.77
d) $6,011.87
e) $4,854.13

problem 3: When a bank pays a 6% nominal rate, with monthly compounding, on deposits, what efficient annual rate does the bank pay?

a) 6.17%
b) 6.71%
c) 5.10%
d) 6.59%
e) 5.91%

problem 4: You are buying your first house for $220,000 and are paying $30,000 as a down payment. You have arranged to finance the remaining $190,000 30-year mortgage with 7% nominal interest rate and monthly payments.

Determine the equal monthly payments you should make?

a) $1,513
b) $1,110
c) $1,264
d) $1,976
e) $1,349

problem 5: Companies produce income from their ‘regular’ operations and from things such as interest on securities they hold, that is termed non-operating income. Mitel Metals recently reported $9,000 of sales, $6,000 of operating costs other than depreciation and $1,500 of depreciation. The company had no amortization charges and no non-operating income. It had issued $4,000 of bonds which carry a 7% interest rate, and its federal-plus-state income tax rate was 40%. Determine the firm's operating income or EBIT?

a) $1,100
b) $1,200
c) $1,300
d) $1,400
e) $1,500

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M97079

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