1. Which of the following could explain why a business might choose to operate as a corporation rather than as a sole proprietorship or a partnership?
a. Corporations generally find it relatively difficult to raise large amounts of capital.
b. Less of a corporation's income is generally subjected to taxes than would be true if the firm were a partnership.
c. Corporate shareholders escape liability for the firm's debts, but this factor may be offset by the tax disadvantages of the corporate form of organization.
d. Corporate investors are exposed to unlimited liability.
2. You deposited $2,000 seven years ago and haven't touched the account since. Now you have $3,656 in the bank. What was the interest rate?
a. 6%
b. 7%
c. 8%
d. 9%
3. Jane wants to have $200,000 in an account in 20 years. If it earns 11 percent per annum over the accumulation period, how much must she save per year (end of year) to have the $200,000?
a. $25,116
b. $3,115
c. $10,000
d. $3,492
4. Idlewild Bank has granted you a seven year loan for $50,000. If your seven annual (end of year) payments are $11,660.45, what is the rate of interest Idlewild is charging?
a. 14%
b. 23%
c. 12.6%
d. none of the above
5. Assume you want to pay off your $10,000, 30-month car loan after only the first 12 months of payments. With interest at 12% compounded monthly, how much will you need to pay off the loan in full at the end of the first year?
a. $5,639
b. $6,354
c. $4,361
d. $7,425