Professional Documents
Culture Documents
Connect Quiz #2 Solutions
Connect Quiz #2 Solutions
** Note that the question numbers are not the same as what you would have seen in the quizzes **
Chapter 5 and 6
1. A payday loan company is offering to give you $1,000 which you can repay the next time you get paid (in about a mont
PV $ (1,000.00)
N 1 month
I/Y 9.00% continuous compounding
EAR 9.42% =+EXP(C9)-1
2. Your credit card charges an APR of 29% on your balance. Interest is compounded on a daily basis, 365 days a year. If yo
3. You are saving up to buy a car. The car will cost $35,000. If you put $20,000 into an investment portfolio that pays an ave
FV $ 35,000.00
PV $ 20,000.00
I/Y 5.00%
N 11.4698 years = ln(FV/PV) / ln(1+r) =+(LN(C28/C29))/(LN(1+C30))
OR N 11.4698 years =+NPER(C30,0,-C29,C28)
What is the effective annual rate on a loan with a stated interest rate of 5.5% compounded quarterly?
5. If interest is 5% compounded annually, calculate the present value of five year cash flows of $1,000 in year 1; $2,000 in
6. You are saving up to buy the new Orange Widget which costs $1,000. How much would you have to put in your savings
FV $ (1,000.00)
N 4 quarters
I/Y 1.00%
PV $960.98 =+PV(C57,C56,0,C55,0)
7. You have invested $2,500 in an asset that will yield 8% each year for the next 5 years. How much money will you get ba
PV $ (2,500.00)
I/Y 8.00%
N 5 years
FV $3,673.32 =+FV(C64,C65,0,C63,0)
8. You just had your 30th birthday and you are planning for your retirement at age 66. You currently have $20,000 in your
What rate of return must be earned on your investment portfolio (assuming that you do not add any more money into
N 36 years
PV $ (20,000.00)
FV $ 1,500,000.00
I/Y 12.7418% = [(FV/PV)^(1/N)] - 1 =RATE(C72,0,C73,C74,0)
9. Ms. Tanner has just graduated from the University of Edmonton. She owed approximately $67,000 in student loans. Sh
PV $ (67,000.00)
N 10 years
I/Y 8.00%
PMT $9,984.98 =PMT(C82,C81,C80,0,0)
basis, 365 days a year. If you made the minimum payment of $150 per month on your credit card balance, how long will it take you to p
t portfolio that pays an average 5% return per year, how long must you wait to buy the car?
$1,000 in year 1; $2,000 in year 2; $3,000 in year 3; $4,000 in year 4 and $5,000 in year 5.
have to put in your savings accounts now if you wish to make the purchase in one year's time? Your savings account pays an interest of
much money will you get back from your investment at the end of the 5th year?
rently have $20,000 in your investment portfolio, and you estimate that you will need at least $1.5 million in order to retire comfortably
add any more money into the account) for your retirement plan to work?
67,000 in student loans. She has 10 years to pay off her student loans, starting one year from now. The interest rate on her student loan
scount rate ________.
ve annual rate on this loan?
erest rate on her student loans is 8%. How much must Ms. Tanner pay each year?