# Test Bank For BrechnerBergeman's Contemporary Mathematics for Business & Consumers

Description

1. A(n) ____________________ is the payment or receipt of equal cash amounts per period for a specified amount of time.

ANSWER: annuity

2. The amount that must be deposited now at compound interest to yield a series of equal periodic payments is the ____________________ value of an annuity.

ANSWER: present

3. A(n) ____________________ annuity is one in which the number of compounding periods per year coincides with the number of annuity payments per year.

ANSWER: simple

4. Annuities ____________________ are annuities that have a specified number of time periods.

ANSWER: certain

5. ____________________ annuities are annuities based on an uncertain time period.

ANSWER: Contingent

6. ____________________ annuities are those in which the annuity payments and compounding periods do not coincide.

ANSWER: Complex

7. When the annuity payment is made at the end of each period, it is known as an ____________________ annuity.

ANSWER: ordinary

8. When the payment is made at the beginning of each period, it is called an ____________________.

ANSWER: annuity due

9. The ____________________ value of an annuity is also known as the amount of an annuity.

ANSWER: future

10. ____________________ are accounts used to set aside equal amounts of money at the end of each period, at compound interest, for the purpose of saving for a future obligation.

ANSWER: Sinking funds

11. ____________________ is the opposite of a sinking fund.

ANSWER: Amortization

12. Benigno deposited $1,000, at the END of every month for 3 years in a savings account. If the account paid 12% interest, compounded monthly, use Table 12-1 from your text to find the future value of his account.

a. $3,374.40

b. $4,320.00

c. $40,320.00

d. $43,076.88

ANSWER: d

13. John deposited $2,000, at the END of every month for 2 years in a savings account. If the account paid 6% interest, compounded monthly, use Table 12-1 from your text to find the future value of his account.

a. $53,374.40

b. $44,320.00

c. $50,320.10

d. $50,863.92

ANSWER: d

14. Shiraz deposited $500 at the END of each year for 18 years in a savings account. If the account paid 5% interest, compounded annually, use Table 12-1 from your text to find the future value of his account.

a. $12,822.71

b. $12,920.19

c. $14,066.19

d. $15,452.83

ANSWER: c

15. Use Table 12-1 of your text to find the future value of $1,300 deposited at the BEGINNING of every three months, for 3 years if the bank pays 12% interest, compounded quarterly.

a. $18,789.65

b. $19,955.20

c. $19,003.13

d. $20,830.22

ANSWER: c

16. Use Table 12-1 of your text to find the future value of $300 deposited at the BEGINNING of every year, for 15 years if the bank pays 6% interest compounded annually.

a. $3,500.00

b. $6,982.79

c. $7,401.76

d. $4,770.00

ANSWER: c

17. Lorna deposited $1,500, at the BEGINNING of every six months for 12 years, in an account at her credit union. If the account paid 6% interest, compounded semiannually, use Table 12-1 from your text to find the future value of her account.

a. $50,549.75

b. $51,815.72

c. $51,930.92

d. $53,188.89

ANSWER: d

18. Kia deposited $1,200, at the BEGINNING of each year for 30 years in a credit union account. If the account paid 12% interest, compounded annually, use the appropriate formula to find the future value of her account.

a. $311,097.91

b. $288,399.20

c. $298,569.33

d. $324,351.13

ANSWER: d

19. Lidia deposits $900 at the END of each year for 9 years in a savings account. The account pays 8% interest, compounded annually. Lidia calculates that the future value of the ordinary annuity is $11,238.80. What would be the future value if deposits are made at the BEGINNING of each period rather than the END?

a. $11,238.80

b. $12,137.90

c. $12,960.00

d. $13,037.91

ANSWER: b

20. Peter deposits $500 at the END of every month for 3 years in a savings account. The account pays 12% interest, compounded monthly. Peter calculates that the future value of the ordinary annuity is $21,538.44. What would be the future value if deposits were made at the BEGINNING of each period rather than the END? (Calculate the future value by formula)

a. $21,753.83

b. $25,734.44

c. $22,273.44

d. $22,349.85

ANSWER: a

21. Connie wants to have an annuity payment of $2,000 at the END of every three months. How much should she deposit now at 6% interest, compounded quarterly, to yield this payment for 3 years? (Use Table 12-2 in your text)

a. $21,815.02

b. $20,786.85

c. $21,577.10

d. $22,783.26

ANSWER: a

22. Suppose that your bank pays 10% interest, compounded semiannually. Use Table 12-2 of your text to find how much should be deposited now to yield an annuity payment of $400 at the END of every six months, for 4 years.

a. $2,585.28

b. $3,819.64

c. $1,267.95

d. $1,856.40

ANSWER: a

23. Use Table 12-2 in your text to find how much should be deposited now at 8% interest, compounded semiannually, to yield an annuity payment of $400 at the END of each 6 months, for 1 year.

a. $859.24

b. $754.44

c. $645.59

d. $923.72

ANSWER: b

24. Robert wants to have $2,300 at the END of every three months for 8 years. The bank pays 8% interest, compounded quarterly. Robert calculates that the present value of the ordinary annuity is $53,977.16. What would be the present value if payments were to be received at the BEGINNING of every period rather than the END? (Use Table 12-2 from your text)

a. $52,016.20

b. $55,056.71

c. $55,344.83

d. $55,986.21

ANSWER: b

25. Use Table 12-2 from your text to find how much should be deposited now at 8% interest, compounded semiannually, to yield an annuity payment of $400 at the BEGINNING of each six months, for 2 years.

a. $1,510.04

b. $1,110.04

c. $1,451.96

d. $1,354.22

ANSWER: a

26. Your bank pays 8% interest, compounded quarterly. Use Table 12-2 from your text to find how much you should deposit now to yield an annuity payment of $1,300 at the BEGINNING of each three months, for 2 years.

a. $9,713.59

b. $10,823.13

c. $9,523.13

d. $8,413.59

ANSWER: a

27. Use the appropriate formula to find how much you should deposit now at 7% interest, compounded annually, to yield an annuity payment of $800 at the BEGINNING of each year, for 14 years.

a. $6,996.37

b. $7,870.92

c. $7,486.12

d. $8,421.89

ANSWER: c

28. Your bank pays 9% interest, compounded annually. Use the appropriate formula to find how much you should deposit now to yield an annuity payment of $800 at the END of each year, for 10 years.

a. $5,134.13

b. $6,099.86

c. $5,596.20

d. $6,454.28

ANSWER: a

29. Arun wants to have $500 at the END of every year for 20 years. The bank pays 11% interest, compounded annually. Arun calculates that the present value of the ordinary annuity is $3,981.67. What would be the present value if payments were to be received at the BEGINNING of every period rather than the END?

a. $5,183.91

b. $5,525.98

c. $4,043.26

d. $4,419.65

ANSWER: d

30. Hot Wheels Depot needs to accumulate $25,000 in 6 years to purchase new equipment. What sinking fund payment would they need to make at the END of every three months, at 8% interest compounded quarterly? (Use Table 12-1 from your text)

a. $821.78

b. $679.42

c. $545.96

d. $620.42

ANSWER: a

31. Kirk wishes to accumulate $10,000 in 3 years for a down payment on a house. Use Table 12-1 from your text to find the sinking fund payment he would need to make at the END of every month, at 6% interest compounded monthly.

a. $2,773.58

b. $3,733.58

c. $254.22

d. $356.59

ANSWER: c

32. Jon wishes to accumulate $4,500 in 8 years for a long vacation. Use Table 12-1 from your text to find the sinking fund payment he would need to make at the END of every six months, at 4% interest compounded semiannually.

a. $241.43

b. $233.97

c. $207.63

d. $344.10

ANSWER: a

33. Mechanic’s Hardware needs to accumulate $41,000 in 3 years to purchase new equipment. What sinking fund payment would they need to make at the END of each month, at 6% interest compounded monthly? (Use Table 12-1 from your text)

a. $2,111.35

b. $1,885.21

c. $1,042.30

d. $1,399.56

ANSWER: c

34. What amortization payment would you need to make each year, at 12% interest compounded annually, to pay off a loan of $4,000 in 6 years? (Use Table 12-2 from your text)

a. $477.11

b. $486.45

c. $972.90

d. $954.22

ANSWER: c

35. Ryan must pay off a loan of $3,500 in 5 years. Use the appropriate formula to find the amortization payment he would need to make each six months, at 12% interest compounded semiannually.

a. $475.54

b. $970.93

c. $195.69

d. $394.89

ANSWER: a

36. Best Ribs wishes to pay off a debt of $40,000 in 7 years. What amortization payment would they need to make each six months, at 6% interest compounded semiannually? (Use Table 12-2 from your text)

a. $3,541.05

b. $3,910.63

c. $2,727.79

d. $2,955.32

ANSWER: a

37. Linens Plus wishes to pay off a debt of $15,000 in 2 years. What amortization payment would they need to make every month, at 12% interest compounded monthly? (Use Table 12-2 from your text)

a. $625.00

b. $664.81

c. $684.10

d. $706.10

ANSWER: d

38. What amortization payment would you need to make every month, at 12% interest compounded monthly, to pay off a loan of $8,500 in 3 years? (Use Table 12-2 from your text)

a. $3,538.97

b. $282.32

c. $197.32

d. $279.53

ANSWER: b

39. Second Hand Software needs to accumulate $12,000 in 3 years to meet future needs. What sinking fund payment would they need to make at the end of each year, at 6% interest compounded annually? (Use Table 12-1 from your text)

a. $4,110.34

b. $3,769.32

c. $4,392.65

d. $4,634.15

ANSWER: b

40. Jeff wishes to accumulate $5,000 in 5 years. Use the appropriate formula to find the sinking fund payment she would need to make at the end of each year, at 5% interest, compounded annually.

a. $989.94

b. $917.47

c. $904.87

d. $949.87

ANSWER: c

41. Leon’s Plumbing wishes to pay off a debt of $21,000 in 6 years. What amortization payment would they need to make every three months, at 6% interest compounded quarterly? (Use Table 12-2 from your text)

a. $722.57

b. $1,032.91

c. $1,048.41

d. $733.41

ANSWER: c

42. What amortization payment would you need to make each year, at 14% interest compounded semiannually, to pay off a loan of $24,000 in 4 years? (Use Table 12-2 from your text)

a. $5,000.00

b. $4,086.45

c. $4,019.23

d. $954.22

ANSWER: c

43. Find the amortization payment you would need to make every six months, at 6% interest compounded semiannually, to pay off a loan of $4,000 in 6 years. (Use Table 12-2 from text)

a. $767.41

b. $813.45

c. $390.14

d. $401.85

ANSWER: d

44. Use the appropriate formula to find the amortization payment you would need to make each three months, at 8% interest compounded quarterly, to pay off a loan of $8,000 in 6 years.

a. $1,730.52

b. $422.97

c. $1,288.29

d. $316.61

ANSWER: b

45. Use the appropriate formula to find how much you should deposit now at 9% interest, compounded annually, to yield an annuity payment of $1,200 at the BEGINNING of each year, for 18 years.

a. $10,252.36

b. $7,870.92

c. $7,486.12

d. $11,452.36

ANSWER: d

46. Dempsey Electric wishes to pay off a debt of $28,000 in 3 years. What amortization payment would they need to make every month, at 12% interest compounded monthly? (Use Table 12-2 from your text)

a. $625.00

b. $844.12

c. $930.00

d. $706.10

ANSWER: c

47. What sinking fund payment would you need to make at the END of each three months, at 12% interest compounded quarterly, to amount to $3,500 in 4 years? (Use Table 12-1 from your text)

a. $232.93

b. $732.32

c. $481.05

d. $173.64

ANSWER: d

48. Find the sinking fund payment you would need to make at the end of each year, at 5% interest compounded annually, to amount to $8,000 in 2 years. (Use the appropriate formula)

a. $2,719.86

b. $1,537.27

c. $2,128.56

d. $3,902.44

ANSWER: d

49. Use Table 12-1 from your text to calculate the future value of the ordinary annuity, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Future Value of

Payments Frequency Period Rate Compounded the Annuity

$6,000 every year 12 years 10% annually __________

ANSWER: $128,305.68

50. Use Table 12-1 from your text to calculate the future value of the ordinary annuity, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Future Value of

Payments Frequency Period Rate Compounded the Annuity

$220 every month 3 years 18% monthly __________

ANSWER: $10,400.71

51. Use Table 12-1 from your text to calculate the future value of the ordinary annuity, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Future Value of

Payments Frequency Period Rate Compounded the Annuity

$10,000 every 6 months 10 years 16% semiannually

ANSWER: $457,619.60

52. Use Table 12-1 from your text to calculate the future value of the ordinary annuity, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Future Value of

Payments Frequency Period Rate Compounded the Annuity

$1,500 every 3 months 2 years 12% quarterly __________

ANSWER: $13,338.51

53. Use Table 12-1 from your text to calculate the future value of the ordinary annuity, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Future Value of

Payments Frequency Period Rate Compounded the Annuity

$1,000 every month 3 years 6% monthly __________

ANSWER: $39,336.10

54. Use Table 12-1 in your text to calculate the future value of the annuity due, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Future Value

Payments Frequency Period Rate Compounded of the Annuity

$40 every month 12% monthly __________

ANSWER: $1,570.31

55. Use Table 12-1 from your text to calculate the future value of the annuity due, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Future Value

Payments Frequency Period Rate Compounded of the Annuity

$300 every 3 months 6 years 6% quarterly __________

ANSWER: $8,718.91

56. Use Table 12-1 from your text to calculate the future value of the annuity due, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Future Value

Payments Frequency Period Rate Compounded of the Annuity

$6,000 every year 12 years 10% annually __________

ANSWER: $141,136.26

57. Use Table 12-1 from your text to calculate the future value of the annuity due, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Future Value

Payments Frequency Period Rate Compounded of the Annuity

$9,000 every 6 months 3 years 14% semiannually __________

ANSWER: $68,886.18

58. Use Table 12-1 from your text to calculate the future value of the annuity due, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Future Value

Payments Frequency Period Rate Compounded of the Annuity

$25 every month 12% monthly __________

ANSWER: $878.32

59. Use Table 12-1 from your text to calculate the future value of the annuity due, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Future Value

Payments Frequency Period Rate Compounded of the Annuity

$2,000 every 6 months 10 years 18% semiannually __________

ANSWER: $111,529.06

60. Use Table 12-2 from your text to calculate the present value of the ordinary annuity, rounding to the nearest cent.

Annuity Payment Time Nominal Present Value

Payments Frequency Period Rate of the Annuity

$600 every month 3 years 18% __________

ANSWER: $16,596.41

61. Use Table 12-2 from your text to calculate the present value of the ordinary annuity, rounding to the nearest cent.

Annuity Payment Time Nominal Present Value

Payments Frequency Period Rate of the Annuity

$1,000 every 3 months 12% __________

ANSWER: $6,230.28

62. Use Table 12-2 from your text to calculate the present value of the ordinary annuity, rounding to the nearest cent.

Annuity Payment Time Nominal Present Value

Payments Frequency Period Rate of the Annuity

$1,500 every month 6% __________

ANSWER: $41,691.08

63. Use Table 12-2 from your text to calculate the present value of the ordinary annuity, rounding to the nearest cent.

Annuity Payment Time Nominal Present Value

Payments Frequency Period Rate of the Annuity

$10,000 every year 20 years 10% __________

ANSWER: $85,135.60

64. Use Table 12-2 from your text to calculate the present value of the ordinary annuity, rounding to the nearest cent.

Annuity Payment Time Nominal Present Value

Payments Frequency Period Rate of the Annuity

$2,000 every 6 months 10 years 16% __________

ANSWER: $19,636.30

65. Use Table 12-2 from your text to calculate the present value of the annuity due, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Present Value

Payments Frequency Period Rate Compounded of the Annuity

$2,200 every 3 months 8 years 6% quarterly __________

ANSWER: $56,421.53

66. Use Table 12-2 from your text to calculate the present value of the annuity due, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Present Value

Payments Frequency Period Rate Compounded of the Annuity

$550 every month 18% monthly __________

ANSWER: $14,446.93

67. Use Table 12-2 from your text to calculate the present value of the annuity due, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Present Value

Payments Frequency Period Rate Compounded of the Annuity

$10,000 every year 15 years 11% annually __________

ANSWER: $79,818.70

68. Use Table 12-2 from your text to calculate the present value of the annuity due, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Present Value

Payments Frequency Period Rate Compounded of the Annuity

$1,500 every 6 months 14% semiannually __________

ANSWER: $8,649.81

69. Use Table 12-2 from your text to calculate the present value of the annuity due, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Present Value

Payments Frequency Period Rate Compounded of the Annuity

$12,500 every year 20 years 7% annually __________

ANSWER: $141,695.00

70. For the sinking funds, use Table 12-1 from your text to calculate the amount of the periodic payments needed to amount to the financial objective (future value of the annuity), rounding to the nearest cent:

Sinking Fund Payment Time Nominal Interest Future Value

Payment Frequency Period Rate Compounded (Objective)

__________ every 3 months 16% quarterly $2,500

ANSWER: $376.90

71. For the sinking funds, use Table 12-1 from your text to calculate the amount of the periodic payments needed to amount to the financial objective (future value of the annuity), rounding to the nearest cent:

Sinking Fund Payment Time Nominal Interest Future Value

Payment Frequency Period Rate Compounded (Objective)

__________ every 6 months 15 years 8% semiannually $600

ANSWER: $10.70

72. For the sinking funds, use Table 12-1 from your text to calculate the amount of the periodic payments needed to amount to the financial objective (future value of the annuity), rounding to the nearest cent:

Sinking Fund Payment Time Nominal Interest Future Value

Payment Frequency Period Rate Compounded (Objective)

__________ every year 20 years 9% annually $1,000,000

ANSWER: $19,546.47

73. For the sinking funds, use Table 12-1 from your text to calculate the amount of the periodic payments needed to amount to the financial objective (future value of the annuity), rounding to the nearest cent:

Sinking Fund Payment Time Nominal Interest Future Value

Payment Frequency Period Rate Compounded (Objective)

__________ every month 2 years 18% monthly $40,000

ANSWER: $1,396.96

74. For the sinking funds, use Table 12-1 from your text to calculate the amount of the periodic payments needed to amount to the financial objective (future value of the annuity), rounding to the nearest cent:

Sinking Fund Payment Time Nominal Interest Future Value

Payment Frequency Period Rate Compounded (Objective)

__________ every 3 months 12% quarterly $25,000

ANSWER: $1,951.94

75. Use Table 12-2 from your text to calculate the amount of the periodic payment required to amortize (pay off) the loans, rounding to the nearest cent:

Loan Payment Term of Nominal Interest Present Value

Payment Period Loan Rate Compounded (Amount of Loan)

_________ every month 3 years 6% monthly $1,800

ANSWER: $54.76

76. Use Table 12-2 from your text to calculate the amount of the periodic payment required to amortize (pay off) the loans, rounding to the nearest cent:

Loan Payment Term of Nominal Interest Present Value

Payment Period Loan Rate Compounded (Amount of Loan)

_________ every year 8 years 15% annually $20,000

ANSWER: $4,457.00

77. Use Table 12-2 from your text to calculate the amount of the periodic payment required to amortize (pay off) the loans, rounding to the nearest cent:

Loan Payment Term of Nominal Interest Present Value

Payment Period Loan Rate Compounded (Amount of Loan)

_________ every 3 months 9 years 12% quarterly $15,000

ANSWER: $687.06

78. Use Table 12-2 from your text to calculate the amount of the periodic payment required to amortize (pay off) the loans, rounding to the nearest cent:

Loan Payment Term of Nominal Interest Present Value

Payment Period Loan Rate Compounded (Amount of Loan)

_________ every month 18% monthly $750

ANSWER: $31.23

79. Use Table 12-2 from your text to calculate the amount of the periodic payment required to amortize (pay off) the loans, rounding to the nearest cent:

Loan Payment Term of Nominal Interest Present Value

Payment Period Loan Rate Compounded (Amount of Loan)

_________ every 6 months 15 years 10% semiannually $10,500

ANSWER: $683.04

80. Use Table 12-2 in your text to calculate the amount of the periodic payment required to amortize (pay off) the loans, rounding to the nearest cent:

Loan Payment Term of Nominal Interest Present Value

Payment Period Loan Rate Compounded (Amount of Loan)

_________ every 3 months 8 years 12% quarterly $48,000

ANSWER: $2,354.24

Narrative 12-1

Use Tables 12-1 and 12-2 from your text to answer the following problems. (Round dollars to the nearest cent)

81. Refer to Narrative 12-1. Anne Thorne deposits $100 at the BEGINNING of each month into her savings account which pays 6% interest compounded monthly. How much will be in her account at the end of years?

ANSWER: $3,244.14

82. Refer to Narrative 12-1. Find the future value of $300 deposited at the END of every year, for 4 years if the bank pays 7% interest, compounded annually.

ANSWER: $1,331.98

83. Refer to Narrative 12-1. Uptown Trust is paying 6% interest compounded quarterly. What is the future value of $2,000 deposited at the END of every 3 months, for 4 years?

ANSWER: $35,864.74

84. Refer to Narrative 12-1. Find the interest earned on an account if a deposit of $800 is made at the END of every quarter, for 8 years if the bank pays 8% interest, compounded quarterly.

ANSWER: $9,781.62

85. Refer to Narrative 12-1. Find the interest earned on an account if a deposit of $500 is made at the END of every quarter, for 5 years if the bank pays 12% interest, compounded quarterly.

ANSWER: $3,435.19

86. Refer to Narrative 12-1. Suppose a bank pays 12% interest, compounded quarterly. Find the amount of interest that a deposit of $1,500, deposited at the END of every quarter for 10 years, would earn.

ANSWER: $53,101.89

87. Refer to Narrative 12-1. Find the interest earned on an account if a deposit of $800 is made at the BEGINNING of every quarter, for 4 years if the bank pays 8% interest, compounded quarterly.

ANSWER: $2,409.66

88. Refer to Narrative 12-1. Find the interest earned on an account if a deposit of $1,000 is made at the BEGINNING of every year, for 3 years if the bank pays 4% interest, compounded annually.

ANSWER: $246.46

89. Refer to Narrative 12-1. Larson & Company owes bondholders $5,500 interest at the END of each quarter for the next 5 years. How much must they deposit now at 8% interest compounded quarterly to yield an annuity payment of $5,500?

ANSWER: $89,932.87

90. Refer to Narrative 12-1. Johnny Ayvas has been awarded an insurance settlement of $10,000 at the BEGINNING of each 6-month period for the next 15 years. How much must the insurance company set aside now, at 10% interest compounded semiannually, in order to pay this obligation to Ayvas?

ANSWER: $161,410.70

91. Refer to Narrative 12-1. Alicia deposited $1,300, at the BEGINNING of each year for 9 years in an account at her credit union. If the account paid 11% interest, compounded annually, find the future value of her account.

ANSWER: $20,438.61

92. Refer to Narrative 12-1. Scott and Chris are sending a child to college this year.

a. How much must Chris and Scott deposit today in order to withdraw $20,000 at the BEGINNING of each year for 4 years, if interest is 7% compounded annually?

b. How much more must be deposited if they want to withdraw $20,000 at the BEGINNING of each year for 5 years, if interest is 7% compounded annually?

ANSWER: a. $72,486.40

b. $15,257.80

93. Andrea’s Book Buyer needs to accumulate $46,000 in 3 years to meet future needs. What sinking fund payment would they need to make at the END of each three months, at 8% interest compounded quarterly? (Use the appropriate formula)

ANSWER: $3,429.74

94. Refer to Narrative 12-1. Martinique wishes to accumulate $12,500 in 3 years for a long vacation. Find the sinking fund payment she would need to make at the END of each six month period, at 8% interest compounded semiannually.

ANSWER: $1,884.52

95. Refer to Narrative 12-1. Michelle Frost wants to accumulate $10,000 in 3 years for a trip to Hawaii. If her bank is paying 12% interest compounded monthly, how much must Michelle deposit at the END of each month to reach her desired goal?

ANSWER: $232.14

96. Refer to Narrative 12-1. Misty Night wants to accumulate $20,000 in 5 years for a trip to Hawaii. If her bank is paying 12% interest compounded quarterly, how much must Misty deposit at the END of each quarter to reach her desired goal?

ANSWER: $744.31

97. Suppose a bank pays 11% interest, compounded annually. Use the appropriate formula to find the future value of $1,300 deposited at the END of every year, for 9 years.

ANSWER: $18,413.16

98. Refer to Narrative 12-1. Mary wants to have an annuity payment of $400, at the END of each year. How much should she deposit now at 9% interest, compounded annually, to yield this payment for 16 years?

ANSWER: $3,325.02

99. Refer to Narrative 12-1. Maria wants to have an annuity payment of $500, at the END of each year. How much should she deposit now at 8% interest, compounded annually, to yield this payment for 20 years?

ANSWER: $4,909.08

100. Refer to Narrative 12-1. Angie needs to have an annuity payment of $1,300, at the BEGINNING of each year for 10 years. How much should she deposit now at 10% interest, compounded annually, to yield this payment?

ANSWER: $8,786.73

101. Refer to Narrative 12-1. Jerry wants to have $1,300 at the end of each year for 14 years. The bank pays 12% interest, compounded annually. Jerry calculates that the present value of the ordinary annuity is $8,616.62. What would be the present value if payments are to be received at the BEGINNING of each period rather than the end?

ANSWER: $9,650.62

102. Refer to Narrative 12-1. Henry wishes to accumulate $4,500 in 2 years for a long vacation. Find the sinking fund payment he would need to make at the END of each year, at 11% interest compounded annually.

ANSWER: $2,132.70

103. Refer to Narrative 12-1. Lothar wishes to accumulate $3,500 in 3 years for a home sound system. Find the sinking fund payment he would need to make at the END of each year, at 10% interest compounded annually.

ANSWER: $1,057.40

104. Refer to Narrative 12-1. Andy needs to pay off a loan of $8,000 in 5 years. Find the amortization payment he would need to make each year, at 7% interest compounded annually, in order to pay off her loan

ANSWER: $1,951.12

105. Refer to Narrative 12-1. Juno needs to pay off a loan of $9,500 in 4 years. Find the amortization payment she would need to make each year, at 8% interest compounded annually, in order to pay off her loan.

ANSWER: $2,868.24

106. Refer to Narrative 12-1. Derek Williams purchased a new car for $28,750. He made a $5,000 down payment and financed the balance at his bank for 3 years. What payments are required at the END of every month, at 18% interest, to pay off the loan?

ANSWER: $858.62

107. Craig Consulting needs to accumulate $38,000 in 4 years to meet future needs. What sinking fund payment would they need to make at the END of each three months, at 6% interest compounded quarterly? (Use the appropriate formula)

ANSWER: $2,119.07

108. Patty’s Plants wishes to pay off a debt of $10,000 in 2 years. What amortization payment would they need to make each year, at 10% interest compounded annually? (Use the appropriate formula)

ANSWER: $5,761.90

109. Refer to Narrative 12-1. Earl Watkins is ready to retire and has saved up $250,000 for that purpose. He wants to amortize that amount in a retirement fund so that he will receive equal annual payments over the next 20 years. At the END of 20 years, there will be no funds left in the account. If the fund earns 17% interest compounded annually, how much will Earl receive each year?

ANSWER: $44,422.57

110. Refer to Narrative 12-1. Chad Earl is ready to establish a trust fund for his son and has saved up $350,000 for that purpose. He wants to amortize that amount in a trust fund so that his son will receive equal annual payments over the next 21 years. At the END of 21 years, there will be no funds left in the account. If the fund earns 8% interest compounded annually, how much will his son receive each year?

ANSWER: $34,941.30

111. Refer to Narrative 12-1. Chelsea Middleton is planning for her retirement. She deposits $5,000 at the BEGINNING of each year into an account paying 7% interest compounded annually. How much of the total in her account after 30 years would be the amount of interest earned?

ANSWER: $355,365.20

112. Refer to Narrative 12-1. Jim Macon wants to purchase a car in 5 years. He can afford to deposit $300 at the BEGINNING of each 3-month period.

a. How much will he have available if he invests at 6% interest compounded quarterly?

b. How much more will he have available if he can receive 8% interest compounded quarterly?

ANSWER: a. $7,041.16

b. $393.84

113. Refer to Narrative 12-1. Anita Jacobs could deposit $600 every 3 months in her credit union which pays 12% interest compounded quarterly. How much more would she have in her account at the END of 4 years if she deposited the $600 at the BEGINNING of each quarter rather than at the END of each quarter?

ANSWER: $362.82

114. Refer to Narrative 12-1. Bob Cuckely can earn 12% interest compounded monthly at his credit union. If he deposits $200 at the END of each month for 3 years, how much interest will he have earned?

ANSWER: $1,415.38

115. Refer to Narrative 12-1. Strong Hardware Company has decided to save for a future expansion to a second location. They invest $2,800 at the END of every month at 12% interest compounded monthly.

a. How much will be available for the second location after 2 years?

b. How much more will be available after 3 years?

ANSWER: a. $75,525.69

b. $45,089.57

116. Refer to Narrative 12-1. Denise Rhodes wants to establish a savings plan that will enable her to accumulate $25,000 in 12 years.

a. What equal payments would be needed at the END of every 6 months if she could invest at 16% interest compounded semi-annually?

b. What equal payments would be needed annually if she could invest at 18% interest compounded annually?

ANSWER: a. $374.45

b. $715.70

117. Refer to Narrative 12-1. Vassar Ingraham is saving to purchase a new car after graduation in years. She estimates she will need $19,100 for the car, and sets up a plan whereby she deposits equal amounts into a savings account at the END of every 3-month period. Her bank is currently paying 6% interest compounded quarterly. Of the total amount in her savings account at the END of years, how much of it did she deposit?

ANSWER: $16,779.42

118. Refer to Narrative 12-1. Jenny Poole bought a bedroom suite for $4,600 at Richard’s Furniture. She made a $1,200 down payment and financed the balance at the store over a two year period at 12% interest.

a. What equal monthly payments will be required by Jenny to amortize the loan?

b. If Jenny’s credit union will finance the furniture for 6% interest compounded monthly, how much can she save per month on the payments?

ANSWER: a. $160.05

b. $9.36

119. Refer to Narrative 12-1. Colleen O’Brien has won a sweepstakes payable in 32 semiannual payments of $1,000 each. The organizers of the contest can deposit now at 14% interest compounded semiannually. How much less would they have to deposit today if the annuity is paid at the end of each 6-month period rather than at the BEGINNING of each period?

ANSWER: $885.25

120. Refer to Narrative 12-1. Jay Murphy purchased a parcel of land for $1,200,000 with a 20% down payment and the remainder amortized over an 18-year period, at 10% interest.

a. What equal semiannual payments are required to amortize this loan over 18 years?

b. What is the amount of total interest paid on this loan over the 18 years?

ANSWER: a. $58,017.08

b. $1,128,614.88

121. Refer to Narrative 12-1. Accurate Manufacturing Company established a sinking fund to pay off a $1,000,000 bond fund issue that comes due in 9 years.

a. What equal payments must be deposited into the fund every 3 months at 8% interest compounded quarterly in order for Accurate to meet this financial obligation?

b. How much total interest will they have earned?

ANSWER: a. $19,232.85

b. $307,617.40

122. Refer to Narrative 12-1. Lisa Daniels wants to receive $2,000 per year for the next 8 years. She can receive $1,000 at the END of every 6 months or $500 at the end of every 3 months. She can invest at 6% interest annually. How much less will she have to deposit today if she elects to receive $1,000 at the END of every 6 months?

ANSWER: $72.47

123. Payments of equal amounts of money per period for a specified amount of time is referred to as a annulment.

a. True

b. False

ANSWER: False

124. Annuities where the payments and compounding periods do not coincide are called simple annuities.

a. True

b. False

ANSWER: False

125. Contingent annuities are based on an uncertain period of time, such as the life of person.

a. True

b. False

ANSWER: True

126. The total amount of the annuity payments and the accumulated interest on those payments is known as the future value of the annuity.

a. True

b. False

ANSWER: True

127. To calculate the future value of an ordinary annuity due, use the following formula:

a. True

b. False

ANSWER: True

128. What is the future value of an annuity of $250 per month for 6 years at 3% interest compounded monthly?

The answer is $23,751.76.

a. True

b. False

ANSWER: False

129. A lump sum amount of money that must be deposited now to provide a specified series of equal payments (annuity) in the future is known as the future value of an annuity.

a. True

b. False

ANSWER: False

130. To find the present value of an annuity due, use the following formula:

a. True

b. False

ANSWER: True

131. What is the present value of an ordinary annuity of $600 per quarter for five years 7% interest compounded annually?

The answer is $7,282.27.

a. True

b. False

ANSWER: True

132. Accounts used to set aside equal amounts of money at the end of each period at compound interest for the purpose of saving for a future obligation is known as a standard annuity.

a. True

b. False

ANSWER: False

133. A financial arrangement whereby a lump-sum obligation is incurred at compound interest now, such as a loan, and is paid off or liquidated by a series of equal periodic payments for a specified period of time is known as amortization.

a. True

b. False

ANSWER: True

134. The formula for calculating a sinking fund payment is as follows:

a. True

b. False

ANSWER: False

135. An ordinary annuity is paid or received at the beginning of each time period.

a. True

b. False

ANSWER: True

136. The table factor for the present value of an annuity due is found by adding one period to the number of periods of the annuity and then subtracting 1.00000 from the resulting table factor.

a. True

b. False

ANSWER: False

137. An ordinary annuity is paid or received at the end of each time period.

a. True

b. False

ANSWER: True

1. A(n) ____________________ is the payment or receipt of equal cash amounts per period for a specified amount of time.

ANSWER: annuity

2. The amount that must be deposited now at compound interest to yield a series of equal periodic payments is the ____________________ value of an annuity.

ANSWER: present

3. A(n) ____________________ annuity is one in which the number of compounding periods per year coincides with the number of annuity payments per year.

ANSWER: simple

4. Annuities ____________________ are annuities that have a specified number of time periods.

ANSWER: certain

5. ____________________ annuities are annuities based on an uncertain time period.

ANSWER: Contingent

6. ____________________ annuities are those in which the annuity payments and compounding periods do not coincide.

ANSWER: Complex

7. When the annuity payment is made at the end of each period, it is known as an ____________________ annuity.

ANSWER: ordinary

8. When the payment is made at the beginning of each period, it is called an ____________________.

ANSWER: annuity due

9. The ____________________ value of an annuity is also known as the amount of an annuity.

ANSWER: future

10. ____________________ are accounts used to set aside equal amounts of money at the end of each period, at compound interest, for the purpose of saving for a future obligation.

ANSWER: Sinking funds

11. ____________________ is the opposite of a sinking fund.

ANSWER: Amortization

12. Benigno deposited $1,000, at the END of every month for 3 years in a savings account. If the account paid 12% interest, compounded monthly, use Table 12-1 from your text to find the future value of his account.

a. $3,374.40

b. $4,320.00

c. $40,320.00

d. $43,076.88

ANSWER: d

13. John deposited $2,000, at the END of every month for 2 years in a savings account. If the account paid 6% interest, compounded monthly, use Table 12-1 from your text to find the future value of his account.

a. $53,374.40

b. $44,320.00

c. $50,320.10

d. $50,863.92

ANSWER: d

14. Shiraz deposited $500 at the END of each year for 18 years in a savings account. If the account paid 5% interest, compounded annually, use Table 12-1 from your text to find the future value of his account.

a. $12,822.71

b. $12,920.19

c. $14,066.19

d. $15,452.83

ANSWER: c

15. Use Table 12-1 of your text to find the future value of $1,300 deposited at the BEGINNING of every three months, for 3 years if the bank pays 12% interest, compounded quarterly.

a. $18,789.65

b. $19,955.20

c. $19,003.13

d. $20,830.22

ANSWER: c

16. Use Table 12-1 of your text to find the future value of $300 deposited at the BEGINNING of every year, for 15 years if the bank pays 6% interest compounded annually.

a. $3,500.00

b. $6,982.79

c. $7,401.76

d. $4,770.00

ANSWER: c

17. Lorna deposited $1,500, at the BEGINNING of every six months for 12 years, in an account at her credit union. If the account paid 6% interest, compounded semiannually, use Table 12-1 from your text to find the future value of her account.

a. $50,549.75

b. $51,815.72

c. $51,930.92

d. $53,188.89

ANSWER: d

18. Kia deposited $1,200, at the BEGINNING of each year for 30 years in a credit union account. If the account paid 12% interest, compounded annually, use the appropriate formula to find the future value of her account.

a. $311,097.91

b. $288,399.20

c. $298,569.33

d. $324,351.13

ANSWER: d

19. Lidia deposits $900 at the END of each year for 9 years in a savings account. The account pays 8% interest, compounded annually. Lidia calculates that the future value of the ordinary annuity is $11,238.80. What would be the future value if deposits are made at the BEGINNING of each period rather than the END?

a. $11,238.80

b. $12,137.90

c. $12,960.00

d. $13,037.91

ANSWER: b

20. Peter deposits $500 at the END of every month for 3 years in a savings account. The account pays 12% interest, compounded monthly. Peter calculates that the future value of the ordinary annuity is $21,538.44. What would be the future value if deposits were made at the BEGINNING of each period rather than the END? (Calculate the future value by formula)

a. $21,753.83

b. $25,734.44

c. $22,273.44

d. $22,349.85

ANSWER: a

21. Connie wants to have an annuity payment of $2,000 at the END of every three months. How much should she deposit now at 6% interest, compounded quarterly, to yield this payment for 3 years? (Use Table 12-2 in your text)

a. $21,815.02

b. $20,786.85

c. $21,577.10

d. $22,783.26

ANSWER: a

22. Suppose that your bank pays 10% interest, compounded semiannually. Use Table 12-2 of your text to find how much should be deposited now to yield an annuity payment of $400 at the END of every six months, for 4 years.

a. $2,585.28

b. $3,819.64

c. $1,267.95

d. $1,856.40

ANSWER: a

23. Use Table 12-2 in your text to find how much should be deposited now at 8% interest, compounded semiannually, to yield an annuity payment of $400 at the END of each 6 months, for 1 year.

a. $859.24

b. $754.44

c. $645.59

d. $923.72

ANSWER: b

24. Robert wants to have $2,300 at the END of every three months for 8 years. The bank pays 8% interest, compounded quarterly. Robert calculates that the present value of the ordinary annuity is $53,977.16. What would be the present value if payments were to be received at the BEGINNING of every period rather than the END? (Use Table 12-2 from your text)

a. $52,016.20

b. $55,056.71

c. $55,344.83

d. $55,986.21

ANSWER: b

25. Use Table 12-2 from your text to find how much should be deposited now at 8% interest, compounded semiannually, to yield an annuity payment of $400 at the BEGINNING of each six months, for 2 years.

a. $1,510.04

b. $1,110.04

c. $1,451.96

d. $1,354.22

ANSWER: a

26. Your bank pays 8% interest, compounded quarterly. Use Table 12-2 from your text to find how much you should deposit now to yield an annuity payment of $1,300 at the BEGINNING of each three months, for 2 years.

a. $9,713.59

b. $10,823.13

c. $9,523.13

d. $8,413.59

ANSWER: a

27. Use the appropriate formula to find how much you should deposit now at 7% interest, compounded annually, to yield an annuity payment of $800 at the BEGINNING of each year, for 14 years.

a. $6,996.37

b. $7,870.92

c. $7,486.12

d. $8,421.89

ANSWER: c

28. Your bank pays 9% interest, compounded annually. Use the appropriate formula to find how much you should deposit now to yield an annuity payment of $800 at the END of each year, for 10 years.

a. $5,134.13

b. $6,099.86

c. $5,596.20

d. $6,454.28

ANSWER: a

29. Arun wants to have $500 at the END of every year for 20 years. The bank pays 11% interest, compounded annually. Arun calculates that the present value of the ordinary annuity is $3,981.67. What would be the present value if payments were to be received at the BEGINNING of every period rather than the END?

a. $5,183.91

b. $5,525.98

c. $4,043.26

d. $4,419.65

ANSWER: d

30. Hot Wheels Depot needs to accumulate $25,000 in 6 years to purchase new equipment. What sinking fund payment would they need to make at the END of every three months, at 8% interest compounded quarterly? (Use Table 12-1 from your text)

a. $821.78

b. $679.42

c. $545.96

d. $620.42

ANSWER: a

31. Kirk wishes to accumulate $10,000 in 3 years for a down payment on a house. Use Table 12-1 from your text to find the sinking fund payment he would need to make at the END of every month, at 6% interest compounded monthly.

a. $2,773.58

b. $3,733.58

c. $254.22

d. $356.59

ANSWER: c

32. Jon wishes to accumulate $4,500 in 8 years for a long vacation. Use Table 12-1 from your text to find the sinking fund payment he would need to make at the END of every six months, at 4% interest compounded semiannually.

a. $241.43

b. $233.97

c. $207.63

d. $344.10

ANSWER: a

33. Mechanic’s Hardware needs to accumulate $41,000 in 3 years to purchase new equipment. What sinking fund payment would they need to make at the END of each month, at 6% interest compounded monthly? (Use Table 12-1 from your text)

a. $2,111.35

b. $1,885.21

c. $1,042.30

d. $1,399.56

ANSWER: c

34. What amortization payment would you need to make each year, at 12% interest compounded annually, to pay off a loan of $4,000 in 6 years? (Use Table 12-2 from your text)

a. $477.11

b. $486.45

c. $972.90

d. $954.22

ANSWER: c

35. Ryan must pay off a loan of $3,500 in 5 years. Use the appropriate formula to find the amortization payment he would need to make each six months, at 12% interest compounded semiannually.

a. $475.54

b. $970.93

c. $195.69

d. $394.89

ANSWER: a

36. Best Ribs wishes to pay off a debt of $40,000 in 7 years. What amortization payment would they need to make each six months, at 6% interest compounded semiannually? (Use Table 12-2 from your text)

a. $3,541.05

b. $3,910.63

c. $2,727.79

d. $2,955.32

ANSWER: a

37. Linens Plus wishes to pay off a debt of $15,000 in 2 years. What amortization payment would they need to make every month, at 12% interest compounded monthly? (Use Table 12-2 from your text)

a. $625.00

b. $664.81

c. $684.10

d. $706.10

ANSWER: d

38. What amortization payment would you need to make every month, at 12% interest compounded monthly, to pay off a loan of $8,500 in 3 years? (Use Table 12-2 from your text)

a. $3,538.97

b. $282.32

c. $197.32

d. $279.53

ANSWER: b

39. Second Hand Software needs to accumulate $12,000 in 3 years to meet future needs. What sinking fund payment would they need to make at the end of each year, at 6% interest compounded annually? (Use Table 12-1 from your text)

a. $4,110.34

b. $3,769.32

c. $4,392.65

d. $4,634.15

ANSWER: b

40. Jeff wishes to accumulate $5,000 in 5 years. Use the appropriate formula to find the sinking fund payment she would need to make at the end of each year, at 5% interest, compounded annually.

a. $989.94

b. $917.47

c. $904.87

d. $949.87

ANSWER: c

41. Leon’s Plumbing wishes to pay off a debt of $21,000 in 6 years. What amortization payment would they need to make every three months, at 6% interest compounded quarterly? (Use Table 12-2 from your text)

a. $722.57

b. $1,032.91

c. $1,048.41

d. $733.41

ANSWER: c

42. What amortization payment would you need to make each year, at 14% interest compounded semiannually, to pay off a loan of $24,000 in 4 years? (Use Table 12-2 from your text)

a. $5,000.00

b. $4,086.45

c. $4,019.23

d. $954.22

ANSWER: c

43. Find the amortization payment you would need to make every six months, at 6% interest compounded semiannually, to pay off a loan of $4,000 in 6 years. (Use Table 12-2 from text)

a. $767.41

b. $813.45

c. $390.14

d. $401.85

ANSWER: d

44. Use the appropriate formula to find the amortization payment you would need to make each three months, at 8% interest compounded quarterly, to pay off a loan of $8,000 in 6 years.

a. $1,730.52

b. $422.97

c. $1,288.29

d. $316.61

ANSWER: b

45. Use the appropriate formula to find how much you should deposit now at 9% interest, compounded annually, to yield an annuity payment of $1,200 at the BEGINNING of each year, for 18 years.

a. $10,252.36

b. $7,870.92

c. $7,486.12

d. $11,452.36

ANSWER: d

46. Dempsey Electric wishes to pay off a debt of $28,000 in 3 years. What amortization payment would they need to make every month, at 12% interest compounded monthly? (Use Table 12-2 from your text)

a. $625.00

b. $844.12

c. $930.00

d. $706.10

ANSWER: c

47. What sinking fund payment would you need to make at the END of each three months, at 12% interest compounded quarterly, to amount to $3,500 in 4 years? (Use Table 12-1 from your text)

a. $232.93

b. $732.32

c. $481.05

d. $173.64

ANSWER: d

48. Find the sinking fund payment you would need to make at the end of each year, at 5% interest compounded annually, to amount to $8,000 in 2 years. (Use the appropriate formula)

a. $2,719.86

b. $1,537.27

c. $2,128.56

d. $3,902.44

ANSWER: d

49. Use Table 12-1 from your text to calculate the future value of the ordinary annuity, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Future Value of

Payments Frequency Period Rate Compounded the Annuity

$6,000 every year 12 years 10% annually __________

ANSWER: $128,305.68

50. Use Table 12-1 from your text to calculate the future value of the ordinary annuity, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Future Value of

Payments Frequency Period Rate Compounded the Annuity

$220 every month 3 years 18% monthly __________

ANSWER: $10,400.71

51. Use Table 12-1 from your text to calculate the future value of the ordinary annuity, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Future Value of

Payments Frequency Period Rate Compounded the Annuity

$10,000 every 6 months 10 years 16% semiannually

ANSWER: $457,619.60

52. Use Table 12-1 from your text to calculate the future value of the ordinary annuity, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Future Value of

Payments Frequency Period Rate Compounded the Annuity

$1,500 every 3 months 2 years 12% quarterly __________

ANSWER: $13,338.51

53. Use Table 12-1 from your text to calculate the future value of the ordinary annuity, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Future Value of

Payments Frequency Period Rate Compounded the Annuity

$1,000 every month 3 years 6% monthly __________

ANSWER: $39,336.10

54. Use Table 12-1 in your text to calculate the future value of the annuity due, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Future Value

Payments Frequency Period Rate Compounded of the Annuity

$40 every month 12% monthly __________

ANSWER: $1,570.31

55. Use Table 12-1 from your text to calculate the future value of the annuity due, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Future Value

Payments Frequency Period Rate Compounded of the Annuity

$300 every 3 months 6 years 6% quarterly __________

ANSWER: $8,718.91

56. Use Table 12-1 from your text to calculate the future value of the annuity due, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Future Value

Payments Frequency Period Rate Compounded of the Annuity

$6,000 every year 12 years 10% annually __________

ANSWER: $141,136.26

57. Use Table 12-1 from your text to calculate the future value of the annuity due, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Future Value

Payments Frequency Period Rate Compounded of the Annuity

$9,000 every 6 months 3 years 14% semiannually __________

ANSWER: $68,886.18

58. Use Table 12-1 from your text to calculate the future value of the annuity due, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Future Value

Payments Frequency Period Rate Compounded of the Annuity

$25 every month 12% monthly __________

ANSWER: $878.32

59. Use Table 12-1 from your text to calculate the future value of the annuity due, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Future Value

Payments Frequency Period Rate Compounded of the Annuity

$2,000 every 6 months 10 years 18% semiannually __________

ANSWER: $111,529.06

60. Use Table 12-2 from your text to calculate the present value of the ordinary annuity, rounding to the nearest cent.

Annuity Payment Time Nominal Present Value

Payments Frequency Period Rate of the Annuity

$600 every month 3 years 18% __________

ANSWER: $16,596.41

61. Use Table 12-2 from your text to calculate the present value of the ordinary annuity, rounding to the nearest cent.

Annuity Payment Time Nominal Present Value

Payments Frequency Period Rate of the Annuity

$1,000 every 3 months 12% __________

ANSWER: $6,230.28

62. Use Table 12-2 from your text to calculate the present value of the ordinary annuity, rounding to the nearest cent.

Annuity Payment Time Nominal Present Value

Payments Frequency Period Rate of the Annuity

$1,500 every month 6% __________

ANSWER: $41,691.08

63. Use Table 12-2 from your text to calculate the present value of the ordinary annuity, rounding to the nearest cent.

Annuity Payment Time Nominal Present Value

Payments Frequency Period Rate of the Annuity

$10,000 every year 20 years 10% __________

ANSWER: $85,135.60

64. Use Table 12-2 from your text to calculate the present value of the ordinary annuity, rounding to the nearest cent.

Annuity Payment Time Nominal Present Value

Payments Frequency Period Rate of the Annuity

$2,000 every 6 months 10 years 16% __________

ANSWER: $19,636.30

65. Use Table 12-2 from your text to calculate the present value of the annuity due, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Present Value

Payments Frequency Period Rate Compounded of the Annuity

$2,200 every 3 months 8 years 6% quarterly __________

ANSWER: $56,421.53

66. Use Table 12-2 from your text to calculate the present value of the annuity due, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Present Value

Payments Frequency Period Rate Compounded of the Annuity

$550 every month 18% monthly __________

ANSWER: $14,446.93

67. Use Table 12-2 from your text to calculate the present value of the annuity due, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Present Value

Payments Frequency Period Rate Compounded of the Annuity

$10,000 every year 15 years 11% annually __________

ANSWER: $79,818.70

68. Use Table 12-2 from your text to calculate the present value of the annuity due, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Present Value

Payments Frequency Period Rate Compounded of the Annuity

$1,500 every 6 months 14% semiannually __________

ANSWER: $8,649.81

69. Use Table 12-2 from your text to calculate the present value of the annuity due, rounding to the nearest cent:

Annuity Payment Time Nominal Interest Present Value

Payments Frequency Period Rate Compounded of the Annuity

$12,500 every year 20 years 7% annually __________

ANSWER: $141,695.00

70. For the sinking funds, use Table 12-1 from your text to calculate the amount of the periodic payments needed to amount to the financial objective (future value of the annuity), rounding to the nearest cent:

Sinking Fund Payment Time Nominal Interest Future Value

Payment Frequency Period Rate Compounded (Objective)

__________ every 3 months 16% quarterly $2,500

ANSWER: $376.90

71. For the sinking funds, use Table 12-1 from your text to calculate the amount of the periodic payments needed to amount to the financial objective (future value of the annuity), rounding to the nearest cent:

Sinking Fund Payment Time Nominal Interest Future Value

Payment Frequency Period Rate Compounded (Objective)

__________ every 6 months 15 years 8% semiannually $600

ANSWER: $10.70

72. For the sinking funds, use Table 12-1 from your text to calculate the amount of the periodic payments needed to amount to the financial objective (future value of the annuity), rounding to the nearest cent:

Sinking Fund Payment Time Nominal Interest Future Value

Payment Frequency Period Rate Compounded (Objective)

__________ every year 20 years 9% annually $1,000,000

ANSWER: $19,546.47

73. For the sinking funds, use Table 12-1 from your text to calculate the amount of the periodic payments needed to amount to the financial objective (future value of the annuity), rounding to the nearest cent:

Sinking Fund Payment Time Nominal Interest Future Value

Payment Frequency Period Rate Compounded (Objective)

__________ every month 2 years 18% monthly $40,000

ANSWER: $1,396.96

74. For the sinking funds, use Table 12-1 from your text to calculate the amount of the periodic payments needed to amount to the financial objective (future value of the annuity), rounding to the nearest cent:

Sinking Fund Payment Time Nominal Interest Future Value

Payment Frequency Period Rate Compounded (Objective)

__________ every 3 months 12% quarterly $25,000

ANSWER: $1,951.94

75. Use Table 12-2 from your text to calculate the amount of the periodic payment required to amortize (pay off) the loans, rounding to the nearest cent:

Loan Payment Term of Nominal Interest Present Value

Payment Period Loan Rate Compounded (Amount of Loan)

_________ every month 3 years 6% monthly $1,800

ANSWER: $54.76

76. Use Table 12-2 from your text to calculate the amount of the periodic payment required to amortize (pay off) the loans, rounding to the nearest cent:

Loan Payment Term of Nominal Interest Present Value

Payment Period Loan Rate Compounded (Amount of Loan)

_________ every year 8 years 15% annually $20,000

ANSWER: $4,457.00

77. Use Table 12-2 from your text to calculate the amount of the periodic payment required to amortize (pay off) the loans, rounding to the nearest cent:

Loan Payment Term of Nominal Interest Present Value

Payment Period Loan Rate Compounded (Amount of Loan)

_________ every 3 months 9 years 12% quarterly $15,000

ANSWER: $687.06

78. Use Table 12-2 from your text to calculate the amount of the periodic payment required to amortize (pay off) the loans, rounding to the nearest cent:

Loan Payment Term of Nominal Interest Present Value

Payment Period Loan Rate Compounded (Amount of Loan)

_________ every month 18% monthly $750

ANSWER: $31.23

79. Use Table 12-2 from your text to calculate the amount of the periodic payment required to amortize (pay off) the loans, rounding to the nearest cent:

Loan Payment Term of Nominal Interest Present Value

Payment Period Loan Rate Compounded (Amount of Loan)

_________ every 6 months 15 years 10% semiannually $10,500

ANSWER: $683.04

80. Use Table 12-2 in your text to calculate the amount of the periodic payment required to amortize (pay off) the loans, rounding to the nearest cent:

Loan Payment Term of Nominal Interest Present Value

Payment Period Loan Rate Compounded (Amount of Loan)

_________ every 3 months 8 years 12% quarterly $48,000

ANSWER: $2,354.24

Narrative 12-1

Use Tables 12-1 and 12-2 from your text to answer the following problems. (Round dollars to the nearest cent)

81. Refer to Narrative 12-1. Anne Thorne deposits $100 at the BEGINNING of each month into her savings account which pays 6% interest compounded monthly. How much will be in her account at the end of years?

ANSWER: $3,244.14

82. Refer to Narrative 12-1. Find the future value of $300 deposited at the END of every year, for 4 years if the bank pays 7% interest, compounded annually.

ANSWER: $1,331.98

83. Refer to Narrative 12-1. Uptown Trust is paying 6% interest compounded quarterly. What is the future value of $2,000 deposited at the END of every 3 months, for 4 years?

ANSWER: $35,864.74

84. Refer to Narrative 12-1. Find the interest earned on an account if a deposit of $800 is made at the END of every quarter, for 8 years if the bank pays 8% interest, compounded quarterly.

ANSWER: $9,781.62

85. Refer to Narrative 12-1. Find the interest earned on an account if a deposit of $500 is made at the END of every quarter, for 5 years if the bank pays 12% interest, compounded quarterly.

ANSWER: $3,435.19

86. Refer to Narrative 12-1. Suppose a bank pays 12% interest, compounded quarterly. Find the amount of interest that a deposit of $1,500, deposited at the END of every quarter for 10 years, would earn.

ANSWER: $53,101.89

87. Refer to Narrative 12-1. Find the interest earned on an account if a deposit of $800 is made at the BEGINNING of every quarter, for 4 years if the bank pays 8% interest, compounded quarterly.

ANSWER: $2,409.66

88. Refer to Narrative 12-1. Find the interest earned on an account if a deposit of $1,000 is made at the BEGINNING of every year, for 3 years if the bank pays 4% interest, compounded annually.

ANSWER: $246.46

89. Refer to Narrative 12-1. Larson & Company owes bondholders $5,500 interest at the END of each quarter for the next 5 years. How much must they deposit now at 8% interest compounded quarterly to yield an annuity payment of $5,500?

ANSWER: $89,932.87

90. Refer to Narrative 12-1. Johnny Ayvas has been awarded an insurance settlement of $10,000 at the BEGINNING of each 6-month period for the next 15 years. How much must the insurance company set aside now, at 10% interest compounded semiannually, in order to pay this obligation to Ayvas?

ANSWER: $161,410.70

91. Refer to Narrative 12-1. Alicia deposited $1,300, at the BEGINNING of each year for 9 years in an account at her credit union. If the account paid 11% interest, compounded annually, find the future value of her account.

ANSWER: $20,438.61

92. Refer to Narrative 12-1. Scott and Chris are sending a child to college this year.

a. How much must Chris and Scott deposit today in order to withdraw $20,000 at the BEGINNING of each year for 4 years, if interest is 7% compounded annually?

b. How much more must be deposited if they want to withdraw $20,000 at the BEGINNING of each year for 5 years, if interest is 7% compounded annually?

ANSWER: a. $72,486.40

b. $15,257.80

93. Andrea’s Book Buyer needs to accumulate $46,000 in 3 years to meet future needs. What sinking fund payment would they need to make at the END of each three months, at 8% interest compounded quarterly? (Use the appropriate formula)

ANSWER: $3,429.74

94. Refer to Narrative 12-1. Martinique wishes to accumulate $12,500 in 3 years for a long vacation. Find the sinking fund payment she would need to make at the END of each six month period, at 8% interest compounded semiannually.

ANSWER: $1,884.52

95. Refer to Narrative 12-1. Michelle Frost wants to accumulate $10,000 in 3 years for a trip to Hawaii. If her bank is paying 12% interest compounded monthly, how much must Michelle deposit at the END of each month to reach her desired goal?

ANSWER: $232.14

96. Refer to Narrative 12-1. Misty Night wants to accumulate $20,000 in 5 years for a trip to Hawaii. If her bank is paying 12% interest compounded quarterly, how much must Misty deposit at the END of each quarter to reach her desired goal?

ANSWER: $744.31

97. Suppose a bank pays 11% interest, compounded annually. Use the appropriate formula to find the future value of $1,300 deposited at the END of every year, for 9 years.

ANSWER: $18,413.16

98. Refer to Narrative 12-1. Mary wants to have an annuity payment of $400, at the END of each year. How much should she deposit now at 9% interest, compounded annually, to yield this payment for 16 years?

ANSWER: $3,325.02

99. Refer to Narrative 12-1. Maria wants to have an annuity payment of $500, at the END of each year. How much should she deposit now at 8% interest, compounded annually, to yield this payment for 20 years?

ANSWER: $4,909.08

100. Refer to Narrative 12-1. Angie needs to have an annuity payment of $1,300, at the BEGINNING of each year for 10 years. How much should she deposit now at 10% interest, compounded annually, to yield this payment?

ANSWER: $8,786.73

101. Refer to Narrative 12-1. Jerry wants to have $1,300 at the end of each year for 14 years. The bank pays 12% interest, compounded annually. Jerry calculates that the present value of the ordinary annuity is $8,616.62. What would be the present value if payments are to be received at the BEGINNING of each period rather than the end?

ANSWER: $9,650.62

102. Refer to Narrative 12-1. Henry wishes to accumulate $4,500 in 2 years for a long vacation. Find the sinking fund payment he would need to make at the END of each year, at 11% interest compounded annually.

ANSWER: $2,132.70

103. Refer to Narrative 12-1. Lothar wishes to accumulate $3,500 in 3 years for a home sound system. Find the sinking fund payment he would need to make at the END of each year, at 10% interest compounded annually.

ANSWER: $1,057.40

104. Refer to Narrative 12-1. Andy needs to pay off a loan of $8,000 in 5 years. Find the amortization payment he would need to make each year, at 7% interest compounded annually, in order to pay off her loan

ANSWER: $1,951.12

105. Refer to Narrative 12-1. Juno needs to pay off a loan of $9,500 in 4 years. Find the amortization payment she would need to make each year, at 8% interest compounded annually, in order to pay off her loan.

ANSWER: $2,868.24

106. Refer to Narrative 12-1. Derek Williams purchased a new car for $28,750. He made a $5,000 down payment and financed the balance at his bank for 3 years. What payments are required at the END of every month, at 18% interest, to pay off the loan?

ANSWER: $858.62

107. Craig Consulting needs to accumulate $38,000 in 4 years to meet future needs. What sinking fund payment would they need to make at the END of each three months, at 6% interest compounded quarterly? (Use the appropriate formula)

ANSWER: $2,119.07

108. Patty’s Plants wishes to pay off a debt of $10,000 in 2 years. What amortization payment would they need to make each year, at 10% interest compounded annually? (Use the appropriate formula)

ANSWER: $5,761.90

109. Refer to Narrative 12-1. Earl Watkins is ready to retire and has saved up $250,000 for that purpose. He wants to amortize that amount in a retirement fund so that he will receive equal annual payments over the next 20 years. At the END of 20 years, there will be no funds left in the account. If the fund earns 17% interest compounded annually, how much will Earl receive each year?

ANSWER: $44,422.57

110. Refer to Narrative 12-1. Chad Earl is ready to establish a trust fund for his son and has saved up $350,000 for that purpose. He wants to amortize that amount in a trust fund so that his son will receive equal annual payments over the next 21 years. At the END of 21 years, there will be no funds left in the account. If the fund earns 8% interest compounded annually, how much will his son receive each year?

ANSWER: $34,941.30

111. Refer to Narrative 12-1. Chelsea Middleton is planning for her retirement. She deposits $5,000 at the BEGINNING of each year into an account paying 7% interest compounded annually. How much of the total in her account after 30 years would be the amount of interest earned?

ANSWER: $355,365.20

112. Refer to Narrative 12-1. Jim Macon wants to purchase a car in 5 years. He can afford to deposit $300 at the BEGINNING of each 3-month period.

a. How much will he have available if he invests at 6% interest compounded quarterly?

b. How much more will he have available if he can receive 8% interest compounded quarterly?

ANSWER: a. $7,041.16

b. $393.84

113. Refer to Narrative 12-1. Anita Jacobs could deposit $600 every 3 months in her credit union which pays 12% interest compounded quarterly. How much more would she have in her account at the END of 4 years if she deposited the $600 at the BEGINNING of each quarter rather than at the END of each quarter?

ANSWER: $362.82

114. Refer to Narrative 12-1. Bob Cuckely can earn 12% interest compounded monthly at his credit union. If he deposits $200 at the END of each month for 3 years, how much interest will he have earned?

ANSWER: $1,415.38

115. Refer to Narrative 12-1. Strong Hardware Company has decided to save for a future expansion to a second location. They invest $2,800 at the END of every month at 12% interest compounded monthly.

a. How much will be available for the second location after 2 years?

b. How much more will be available after 3 years?

ANSWER: a. $75,525.69

b. $45,089.57

116. Refer to Narrative 12-1. Denise Rhodes wants to establish a savings plan that will enable her to accumulate $25,000 in 12 years.

a. What equal payments would be needed at the END of every 6 months if she could invest at 16% interest compounded semi-annually?

b. What equal payments would be needed annually if she could invest at 18% interest compounded annually?

ANSWER: a. $374.45

b. $715.70

117. Refer to Narrative 12-1. Vassar Ingraham is saving to purchase a new car after graduation in years. She estimates she will need $19,100 for the car, and sets up a plan whereby she deposits equal amounts into a savings account at the END of every 3-month period. Her bank is currently paying 6% interest compounded quarterly. Of the total amount in her savings account at the END of years, how much of it did she deposit?

ANSWER: $16,779.42

118. Refer to Narrative 12-1. Jenny Poole bought a bedroom suite for $4,600 at Richard’s Furniture. She made a $1,200 down payment and financed the balance at the store over a two year period at 12% interest.

a. What equal monthly payments will be required by Jenny to amortize the loan?

b. If Jenny’s credit union will finance the furniture for 6% interest compounded monthly, how much can she save per month on the payments?

ANSWER: a. $160.05

b. $9.36

119. Refer to Narrative 12-1. Colleen O’Brien has won a sweepstakes payable in 32 semiannual payments of $1,000 each. The organizers of the contest can deposit now at 14% interest compounded semiannually. How much less would they have to deposit today if the annuity is paid at the end of each 6-month period rather than at the BEGINNING of each period?

ANSWER: $885.25

120. Refer to Narrative 12-1. Jay Murphy purchased a parcel of land for $1,200,000 with a 20% down payment and the remainder amortized over an 18-year period, at 10% interest.

a. What equal semiannual payments are required to amortize this loan over 18 years?

b. What is the amount of total interest paid on this loan over the 18 years?

ANSWER: a. $58,017.08

b. $1,128,614.88

121. Refer to Narrative 12-1. Accurate Manufacturing Company established a sinking fund to pay off a $1,000,000 bond fund issue that comes due in 9 years.

a. What equal payments must be deposited into the fund every 3 months at 8% interest compounded quarterly in order for Accurate to meet this financial obligation?

b. How much total interest will they have earned?

ANSWER: a. $19,232.85

b. $307,617.40

122. Refer to Narrative 12-1. Lisa Daniels wants to receive $2,000 per year for the next 8 years. She can receive $1,000 at the END of every 6 months or $500 at the end of every 3 months. She can invest at 6% interest annually. How much less will she have to deposit today if she elects to receive $1,000 at the END of every 6 months?

ANSWER: $72.47

123. Payments of equal amounts of money per period for a specified amount of time is referred to as a annulment.

a. True

b. False

ANSWER: False

124. Annuities where the payments and compounding periods do not coincide are called simple annuities.

a. True

b. False

ANSWER: False

125. Contingent annuities are based on an uncertain period of time, such as the life of person.

a. True

b. False

ANSWER: True

126. The total amount of the annuity payments and the accumulated interest on those payments is known as the future value of the annuity.

a. True

b. False

ANSWER: True

127. To calculate the future value of an ordinary annuity due, use the following formula:

a. True

b. False

ANSWER: True

128. What is the future value of an annuity of $250 per month for 6 years at 3% interest compounded monthly?

The answer is $23,751.76.

a. True

b. False

ANSWER: False

129. A lump sum amount of money that must be deposited now to provide a specified series of equal payments (annuity) in the future is known as the future value of an annuity.

a. True

b. False

ANSWER: False

130. To find the present value of an annuity due, use the following formula:

a. True

b. False

ANSWER: True

131. What is the present value of an ordinary annuity of $600 per quarter for five years 7% interest compounded annually?

The answer is $7,282.27.

a. True

b. False

ANSWER: True

132. Accounts used to set aside equal amounts of money at the end of each period at compound interest for the purpose of saving for a future obligation is known as a standard annuity.

a. True

b. False

ANSWER: False

133. A financial arrangement whereby a lump-sum obligation is incurred at compound interest now, such as a loan, and is paid off or liquidated by a series of equal periodic payments for a specified period of time is known as amortization.

a. True

b. False

ANSWER: True

134. The formula for calculating a sinking fund payment is as follows:

a. True

b. False

ANSWER: False

135. An ordinary annuity is paid or received at the beginning of each time period.

a. True

b. False

ANSWER: True

136. The table factor for the present value of an annuity due is found by adding one period to the number of periods of the annuity and then subtracting 1.00000 from the resulting table factor.

a. True

b. False

ANSWER: False

137. An ordinary annuity is paid or received at the end of each time period.

a. True

b. False

ANSWER: True

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