Instructions: Please work each problem to the best of your ability. Show all work; credit will not be awarded if I cannot easily see how you solved the problem. Select the best answer for the multiple choice questions.
1. I am planning to invest $800 at the end of each month to my daughter's college (starting at the end of this month) fund that earns a 10% annual
rate of return compounded monthly. Assuming that she starts college
in exactly 5 years and will spend 4 years in college, how much tuition
can she afford to pay at the beginning of each of her 4 years in college? (Round to nearest dollar)
a. $15,260
b. $19,003 0. $19,743
d. $13,637
a. None of the above. Correct answer
2. Donald Trump is wealthy largely because his father was wealthy.
Assume that the Donald inherited $50 million in 1980 (exactly 35
years ago) and invested his inheritance with Warren Buffet's Berkshire-Hathaway. If Berkshire-Hathaway's average annual return
over this period was about 23%, how much should the Donald be
worth today?
a. A lot
b $50.00 billion a. $ 93.053 billion al $26.61 billion
a. None of the above. Correct answer
3. Crazy Cliff's Car Coral has offered to sell you a used Mustang for $15,000. You are required to make payments of $250 (first payment due next week) for 3 years? What is the annual percenatage rate (APR) on this loan?
a. 1.13%
b. 58.54%
c. 78.23%
d. 117.21%
a. None of the above. Correct answer
4. I have been considering refinancing my house. To do so, I will need to borrow $250,000. The loan period is 30 years and payments are made monthly. Several months ago I could have gotten a loan at 3% APR, buttoday the APR is 5.25%. How much additional interest ill I pay over the life of the loan because of the interest rate increase?
a. $303,434
b. $63,302 a. 129,444 d. 192,746 a.