Question

addition, the 1900 annually in ye uniform annu Show all work to receive full credit (attach work). 1. An investor deposits $15,000 in a mutual fund account starting in year 1. In year 2, the investor continues to make annual deposits, but decides to reduce the amount deposited by 10 percent each year. The ROR on the mutual fund is = 10%. How much will the investor have in the mutual fund by year 10? Your solution will be closest to? a. $120,000 C. $80,000 b. $170,000 d. $210,000 2. An investor makes single deposits into a mutual fund of $250 in year 2 and $250 year 4, respectively. In addition, the investor starts making annual deposits starting at $500 in year 6, increasing the deposit by $100 annually in year 7 through year 10 (ending annual deposit would the fore be $900). What is the equivalent uniform annual amount of deposits over 10 years assuming a mutual fund ROR of 10%? Your solution will be closest to? a. $175 C. $320 b. $250 d. $425 3. You are at a bank working to secure a loan. The advisor indicates the loan has an APR (simple interest fee) of 10-percent per year, but you read the fine print to see the loan actually has an APY (compound interest fee) of 11.5 percent per year. You use your understanding of simple and compound interest to determine the cash differential owed on a $30,000 loan over five years. The differential solution will be closest to? a. $3,315 c. $6,700 b. $4,800 d. $8,150 4. You want to give your car a "kick ass" look. You want to spend $2,000 on a lift-package, $1,500 on new tires, $500 on tinted windows, and $1,000 on a spoiler. However, you must borrow the money from your rich aunt "Tilly", who says you have 5 years to pay back the loan and she expects $2,000 in cash interest. You wish to know if this is a reasonable fee, so you calculate the internal ROR on the loan from Aunt Tilly, which will be closest to? a. 5.5% C. 6.5% b. 6.0% d. 7.0% 5. The moment has come and you sit to conduct your fundamentals of engineering exam. Your first economic question asks for you to find the future worth of an annual worth sequence with i=13.25% and n=27 years. This cannot be looked up in compound interest tables, so you must calculate your interest factor by hand, with result closest to? a. 209.6 C. 181.8 b. 0.364 d. 0.557 6. Your loan has a first cost of $30,000 and you know eventually the total cost of the loan will be $48,000 over time. Out of curiosity you decide to calculate home many years it will take to pay off the loan given i=9.5 percent every year? Your solution will be closest to? a. 4.7 years c. 5.9 years b. 5.2 years d. 6.3 years

Answer 1

1. Future worth of geometric series = A * [(1+i)^n - (1+g)^n] / (i - g)

= 15000 * [(1+0.1)^10 - (1-0.1)^10] / (0.1 + 0.1)

= 15000 * [(1.1)^10 - (0.9)^10] / (0.2)

= 15000 * 11.22532

= 168379.80 ~ 168380

Answer is closest to 170000

Therefore correct answer is option b. 170000

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