Reference no: EM133061813
1. Your grandfather gave you a stamp originally issued in 1955, that he bought for 20 cents in that year. But after searching through the internet, you find that same stamp currently (year 2009) is selling for $1,000,000 on E-bay! What rate of return did his investment earn on an annualized basis?
- 11%
- 23%
- 30%
- 33%
- 115%
2. Your significant other's parents agree to pay half the cost of a wedding when you graduate from BU. You will graduate two years from today. You have $5,000 to invest and can earn 8.5% annually on your invested funds. If they will match the amount of money you have in 2 years, what is the most you can spend on the wedding?
- $7,518
- $10,800
- $10,850
- $11,664
- $11,772
3. What is the future value of $15,000 invested today, if you earn 10% annually return compounded monthly for five years?
- 16,453
- 17,289
- 24,680
- 25,276
- 25,934
4. At a zero percent opportunity cost of funds:
- The present value of an investment is equal to the sum of its cash flows
- The future value of an investment is less than the sum of its cash flows
- An investment has a zero present value
- An investment as an infinite present value
- None of the above
5. Simpleton Bank pays 5% simple interest on its savings account balances, while Mega-Complex Bank pays 4% interest compounded semi-annually. If you decide to save $10,000 in each bank, how much interest will you have earned in total after 5 years?
- $4,500.00
- $4,666.53
- $4,689.94
- $4,952.76
- $9,859.47
6. It will take you how long to grow your $4,000 investment in your local savings account to $32,000 to buy the RV of your dreams? Assuming you earn 3.5% interest annually on your savings account.
- 41.14 years
- 60.45 years
- 70.35 years
- 82.29 years
- You will never have enough, no matter how long you invest
Use the following information to answer question 7:
|
Year
|
Cash Flow
|
|
0
|
100
|
|
1
|
400
|
|
2
|
400
|
|
3
|
400
|
|
4
|
500
|
|
5
|
500
|
|
6
|
500
|
|
7
|
500
|
|
8
|
600
|
7. Using a discount rate of 10%, what is the present value of the above cash flow stream.
a. $1,764
b. $1,919
c. $2,384
d. $2,565
e. $2,198
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