Summary Northern Kentucky University FIN 605 Quiz 2 Answered Fall 2024.

Quiz 2 You wish to save $500,000 in the next 25 years. You notice that a corporate bond fund earns about 11 percent per year and that is where you put your savings. How much must you save each year to obtain your goal?  $20,000.00  $2,000.00  $4,370.13  $3,749.98 If the present value of a given sum is equal to its future value, then  there is no inflation  the discount rate must be very high  none of the answers is correct  the discount rate must be zero If you invest the $10,000 you receive at graduation (age 22) in a mutual fund that averages a 12% annual return, how much will you have at the retirement in 40 years?  $783,879  $930,510  $909,090  $510,285 Your brother, who is 6 years old, just received a trust fund that will be worth $25,000 when he is 21 years old. If the fund earns 10 percent interest compounded annually, what is the value of the fund today?  $6,575  $5,985  $6,875  $104,602 The earnings of Omega Supply Company have grown from $2.00 per share to $4.00 per share over a nine year time period. Determine the compound annual growth rate.  22.2%  100%  8%  11.1% Determine how much $1,000 deposited in a savings account paying 8% (compounded annually) will be worth after 5 years.  $784  $1,469  $5,526 This study source was downloaded by from CourseH on :15:23 GMT -05:00 Finding the discounted current value of $1,000 to be received at they end of each of the next 5 years requires calculating the  Present value of an annuity  Future value of an annuity due  Future value of an annuity  Present value of an annuity due Mr. Moore is 35 years old today and is beginning to plan for his retirement. He wants to set aside an equal amount at the end of each of the next 25 years so that he can retire at age 60. He expects to live to they maximum age of 80 and wants to be able to withdraw $25,000 per year from the account on his 61st through 80th birthdays. The account is expected to earn 10 percent per annum for the entire period of time. Determine the size of the annual deposits that must be made by Mr. Moore.  $8,514  $23,449  $212,850  $2,164 The present value of an ordinary annuity is the  Sum of the future value of an equal series of payments  Future value of an equal series of payments  Receipt of equal cash flows for a specified amount of time  Sum of the present value of series of equal periodic payments If a 16 year old high school student put $2,000 at the end of each year for 4 years into an IRA that earned a rate of 9%, how much would she have accumulated by age 65? Assume funds are left to accumulate for 45 years (age 20-65) at 9%.  $442,014  $1,767,995  $9,146  $386,616 How much will you have at the end of 5 years in a European vacation account if you deposit $200 a month in an account that is paying a nominal 12 percent per year, compounded monthly?  $16,497  $15,247  $16,334  $15,817 You have just won a $50,000 bond that pays no interest and matures in 20 years. If the discount rate is 10%, what is the present value of your bond?  $8,900  $7,450 $8,175  $1,490 Billy Bob decided to put $2,400 a year (at the end of each year) into an IRA over his 40 year working life and then retire. What will Billy have if they account will earn 10 percent compounded annually?  $810,917  $23,470  $1,062,223  $394,786 The payment or receipt of a series of equal cash flows per period, at the end of each period, for a specified amount of time is called a(n):  Perpetuity  Annuity due  Simple interest  Ordinary annuity If you invest $10,000 in a 4-year certificate of deposit(CD) paying 10 percent interest compounded annually, determine how much the CD will be worth at the end of 4 years.  $13,600  $15,958  $14,640  $45,730 John is 25 years old and wishes to retire in 30 years. His plan is to invest in a mutual fund earning a 12 percent annual return and have a $1 million retirement fund at age 55. How much must be invest at the end of each year to achieve this goal?  $5,024.60  $33,333.33  $4,143.65  $7,499.96