Questions related to interest rate calculations

Reference no: EM1315569

Multiple choice questions on interest rate calculations.

1. You are considering buying a new, $15,000 car, and you have $2,000 to put toward a down payment. If you can negotiate a nominal annual interest rate of 10% and finance the car over 60 months, what are your monthly car payments?

a. $216.67

b. $252.34

c. $276.21

d. $285.78

e. $318.71

2. Elizabeth has $35,000 in an investment account, but she wants the account to grow to $100,000 in 10 years without making any additional contributions to the account. What effective annual rate of interest does she need to earn on the account to meet her goal?

a. 9.03%

b. 11.07%

c. 10.23%

d. 8.65%

e. 12.32%

3. McGwire Company's pension fund projects that most of its employees will take advantage of an early retirement program the company plans to offer in five years. Anticipating the need to fund these pensions, the firm bought zero coupon U.S. Treasury Trust Certificates maturing in five years. When these instruments were originally issued, they were 12% coupon, 30-year U.S. Treasury bonds. The stripped Treasuries are currently priced to yield 10%. Their total maturity value is $6,000,000. What is their total cost (price to McGwire today?

a. 553,776

b. $5,142,600

c. $3,404,561

d. $4,042,040

e. $3,725,528

Reference no: EM1315569

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