Solution for Craddock Cup Case Study

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Chapter 5 1- You want to find the time value of the annuity below at end of year 3 (t=3). What should you calculate? A) PV of a 4 year annuity due B) FV of a 4 year annuity due C) FV of a 3 year annuity due D) FV of a 4 year ordinary annuity E) FV of a 3 year ordinary annuity






2- Moe is looking at an annuity that makes five $10,000 payments with the first annuity payment occurring 11 years from today. What is the present value of this annuity if Moe’s interest rate is 9% compounded annually? A) 16,430.30 B) 13,558.23 C) 15,987.86 D) 12,897.67 E) 17,987.89 3- You want to buy a car, and a local bank will lend you $30,000. The loan would be fully amortized over 5 years (60 months) and the nominal interest rate would be 12% with interest paid monthly. What would be the monthly loan payment? Assume payments start next period A) 430.89 B) 520.89 C) 667.33 D) 444.89 E) 430.89 4- Your sister turned 30 today and she is planning to save $4000 per year for retirement with the first deposit to be made one year from today (her last deposit will be made at age 60). She will invest in a mutual fund, which she expects to provide a return of 10% per year. She plans to retire 30 years from today, when she turns 60, and she expects to live for 30 years after retirement, to age 90. Under these assumptions, how much can she spend in each year after she retires? Her first withdrawal will be made at the end of her first retirement year (she will also make her last withdrawal at age 90). A) 67,900 B) 65,779 C) 72,500

D) 75,689 E) 69,798 5- Karen and Keith have a $500,000, 30 year (360 month) mortgage. The mortgage has 7.2% nominal annual interest rate. Mortgage payments are made at the end of each month. What is the monthly payment on the mortgage? A) 1,245.87 B) 3,393.94 C) 5,267.67 D) 9,870.45 E) 7,890.67

6- Terry Austin is 30 years old and is saving for…...

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