FINANCE 301 – {CORPORATION FINANCE} PREP ACTUAL EXAM QUESTIONS BY PROF SARA SMIAROWSKI

FINANCE 301 – {CORPORATION FINANCE} PREP ACTUAL EXAM QUESTIONS BY PROF SARA SMIAROWSKI FINANCE 301 QUIZ 1 1. You are considering buying a condo in Boston for $900,000. You plan to make a down payment of $90,000 and finance $810,000 with a 25 year loan. If the interest rate is 5.25%, what is the monthly payment, assuming you'll pay the mortgage at the end of every month. ANSWER: FVA = A(FVIFA); where r/12 and n*12 FVIFA = [(1+r)^n - 1]/r 2. At the reading of the will, you learn that your inheritance will allow you to receive the amount of $530 at the end of each year for a total of 12 consecutive years. However, because of your young age, these amounts will not begin until the end of 3 years. If the interest rate is 8.00%, what is the equivalent present value of the inheritance? ANSWER: PVA = A(PVIFA)/(1+r)^no. of years missed = 530(PVIFA)/(1.08)^2 PVIFA = 3. Burton gifted the amount of $3700 to his favorite grandson by depositing it into an account that earns an interest rate of 5.60% per year and compounds interest 2 times per year. Burton stipulated that his grandson cannot spend the money for 19 years. Calculate to the nearest dollar and cents how much will be in the account when Burton's grandson is able to spend the money. lOMoAR cPSD| ANSWER: FV = PV(1 + r/m)^mn = $10,566.72 lOMoAR cPSD| 4. The Carlile family wants to begin savings for their child's college. They begin contributing $4500 per year at the end of this year. They will continue contributing to the account until their daughter goes to college in 14 years. However, the Carliles fell on some bad financial luck in year 3, and only year 3, and are not able to make the usual $4500 contribution. Using an interest rate of 5.00%, how much will they have accumulated in their child's college fund at the end of 14 years?