Economics

Question 1 (5 points)

One plan to raise money for Texas schools involves an “enrichment tax” that could collect $56 for every student in a certain school district. If there are 50,000 students in the district and the cash flow begins 2 years from now, what is the present worth of the enrichment plan over a 5-year planning period at an interest rate of 8% per year?

Question 1 options:a) 

$8.124 million

b) 

$8.671 million

c) 

$8.587 million

d) 

$7.993 million

Question 2 (5 points)

How much money would you have to pay each year in 8 equal payments, starting 2 years from today, to repay a $20,000 loan received from a relative today, if the interest rate is 8% per year?

Question 2 options:a) 

$3775.44

b) 

$3800.95

c) 

$3698.61

d) 

$3758.62

Question 3 (5 points)

An industrial engineer is planning for his early retirement 25 years from now. He believes he can comfortably set aside $10,000 each year starting now. If he plans to start withdrawing money 1 year after he makes his last deposit (i.e., year 26), what uniform amount could he withdraw each year for 30 years, if the account earns interest at a rate of 8% per year?

Question 3 options:a) 

$69,666

b) 

$63,492

c) 

$65,110

d) 

$71,023

Question 4 (5 points)

Lifetime savings accounts, known as LSAs, would allow people to invest after-tax money without being taxed on any of the gains. If an engineer invests $10,000 now and $10,000 each year for the next 20 years, how much will be in the account immediately after the last deposit if the account grows by 15% per year?

Question 4 options:a) 

F = $1,255,131

b) 

F = $1,188,101

c) 

F = $571,000

d) 

F = $1,528,377

Question 5 (5 points)

By spending $10,000 now and $25,000 three years from now, a plating company can increase its income in years 4 through 10. At an interest rate of 12% per year, how much extra income per year would be needed in years 4 through 10 to recover the investment?

Question 5 options:a) 

A = $6000.95

b) 

A = $8556.42

c) 

A = $10,978.39

d) 

A = $18,655.42

Question 6 (5 points)

Compute the present worth (year 0) of the following cash flows at i = 12% per year.

Year

Amount, $

Year

Amount, $

0

5000

8

700

1–5

1000

9

600

6

900

10

500

7

800

11

400

Question 6 options:a) 

P = $11,198

b) 

P = $11,150

c) 

P = $10,150

d) 

P = $10,198

Question 7 (5 points)

When a uniform series begins at a time other than the end of period 1, it is called a ________ series.

Question 7 options:a) 

automatic

b) 

autonomous

c) 

shifted

d) 

uniform

Question 8 (5 points)

The present worth is always located __________ prior to the first uniform-series amount when using the P/A factor.

Question 8 options:a) 

three periods

b) 

zero periods

c) 

two periods

d) 

one period

Question 9 (5 points)

For an interest rate of 10% per year compounded quarterly, determine the number of times interest would be compounded

(a) per quarter,

(b) per year, and

(c) per 3 years.

Question 9 options:a) 

(a) 12

(b) 4

(c) 1

b) 

(a) 4

(b) 1

(c) 12

c) 

(a) 1

(b) 4

(c) 6

d) 

(a) 1

(b) 4

(c) 12

Question 10 (5 points)

An interest rate of 16% per year, compounded quarterly, is equivalent to what effective interest rate per year?

Question 10 options:a) 

i = 16.59%

b) 

i = 16.99%

c) 

i = 16.89%

d) 

i = 16.79%

Question 11 (5 points)

What effective interest rate per year is equivalent to an effective 18% per year, compounded semiannually?

Question 11 options:a) 

18.0%

b) 

18.1%

c) 

18.7%

d) 

18.3%

Question 12 (5 points)

Determine the P/G factor for 5 years at an effective interest rate of 6% per year, compounded semiannually.

Question 12 options:a) 

7.9345

b) 

4.9455

c) 

4.2124

d) 

1.8836

Question 13 (5 points)

A present sum of $5000 at an interest rate of 8% per year, compounded semiannually, is equivalent to how much money 8 years ago?

Question 13 options:a) 

$$2669.50

b) 

$2644.50

c) 

$2691.25

d) 

$2680.15

Question 14 (5 points)

A 40-day strike at Boeing resulted in 50 fewer deliveries of commercial jetliners at the end of the first quarter of 2000. At a cost of $20 million per plane, what was the equivalent end-of-year cost of the strike (i.e., end of fourth quarter) at an interest rate of 18% per year, compounded monthly?

Question 14 options:a) 

$2.505 billion

b) 

$1.209 billion

c) 

$1.1434 billion

d) 

$2.225 billion

Question 15 (5 points)

An engineer deposits $300 per month into a savings account that pays interest at a rate of 6% per year, compounded semiannually. How much will be in the account at the end of 15 years? Assume no interperiod compounding.

Question 15 options:a) 

$77,575

b) 

$79,992

c) 

$85,636

d) 

$82,086