Adam is investing $4,000 at the end of each year for his wedding. How much will Adam have in his account after 4 years, assuming a 6% interest rate?
Choose the closest answer. A a. $12,673 A b. $20,200 A c. $17,498 A d. $13,860 A e. $16,960
QUESTION 3 Clarence borrowed $6,000 from you 7 years ago. You are charging Clarence 4% interest. How much does Clarence owe you, today? (No payments have been made.) Choose the closest answer.
A- a. $9,560 A- b. $7,896 Ac. $47,390 Ad. $7,680 A 6. $4,320
Henrie purchased a stereo from his cousin. Henrie will pay $250 per year for 4 years.
If Henrie"s payments include interest at 9%, what was the purchase price of the stereo? Choose the closest answer.
IT? a. $91 0 T? b. $1 ,1 43 IT? c. $870 IT? (L $81 0 T? e. $1,000
Jared Corp needs $900,000 for an expansion in 10 years. The company will make 10 equal annual deposits to fund this expansion. If the account earns 5% interest, how much does Jared need to deposit
each year? Choose the closest answer.
A a. $1 1 6,554 ”7‘ b. $135,000 if c. $90,000 ’f d. $71,554 A 6. $45,000
Julie and Heather bought a winning lottery ticket. Julie chose to receive $1,700,000 today. Heather chose to receive her winnings in 3 equal annual payments of $675,000 each. Who made the better
decision and by how much (considering only the time-value of money)? Assume an interest rate of 4% and compute the difference between the alternatives in today‘s dollars. Choose the closest answer. 0 a. Heather, by $173,186
C b. Heather, By $167,425
a“; 0. Julie, by $233,894 1”) d. Heather, by $100,225 0 e. Heather, by $325,000
You put $60,000 in the bank today to fund your son’s college account. He will make 4 equal withdrawals, starting at the end of this year. Assuming the account earns 6% interest, how much can
he withdraw each yea? Choose the closest answer.
(‘1 a. $18,600
A; b. $17,315
7? 0. $15,000
”T; d. $14,400 7“ e. $13,715
At the start of the year, Axon, Inc. issued bonds for $38,800. The bonds had a face value of $36,000. If the coupon rate of interest was 9% and the effective (market) rate of interest was 6.73%, how
would Axon calculate the interest expense for the first year using the effective interest method? C a. $38,800 x 9%
C b. $38,800 x 6.73%
C 0. $36,000 x 9%
C d. $36,000 x 6.73%
C e. $2,800 x 9%
If a bond is sold at a discount, the carrying value reported on the balance sheet in following years:
IIA a. Stays the same each year IAI b. Increases each year IAI c. Decreases each year…
Eagle’s Nest Clothiers issued bonds with a 8% annual stated interest rate and a $20,000 face value. The issue price was $19,780 and the market rate at the date of issue was 9% . Assume the company
uses the effect’we interest rate method. What is the amount of the first year’s interest payment to the bondholders?
f“, a. $1582
C“ b. $1,800
A 0. $1,600 h d. $1,780
Kelsey Corporation issued bonds on 1/1/year1. The bonds have a 10 year maturity, a face value of $200,000 and a stated interest rate of 3%. The market rate of interest on the date of issue was 4%.
The bonds were issued for $183,777. How much interest expense will Kelsey Corp. record related to this bond over the 10-year life. (You do not need to do an amortization schedule to answer this.)
f‘ a. $60,000
A b. $16,223
2“ c. $80,000
’f d. $43,777
(‘- e. $63,777
f“ f. $76,223 A 9. $96,223
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