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# 1. As the compounding rate becomes lower and lower, the future

### Resolved Question:

1.     As the compounding rate becomes lower and lower, the future value of inflows approaches:
A) 0
B) the present value of the inflows
C) infinity

2.     As the discount rate becomes higher and higher, the present value of inflows    approaches:
A)     0
B)     Minus infinity
C)     Plus infinity

3.     XXXXX XXXXX will receive \$1 million in 50 years. The discount rate is 14. As an alternative, she can receive \$2,000 today. Which should she choose?
A)     the \$1 million dollars in 50 years
B)     \$2,000 today
C)      She should be indifferent

4.     Dr. J. wants to buy a Dell computer which will cost \$2,788 four years from today. He would like to set aside an equal amount at the end of each year in order to accumulate the amount needed. He can earn 7% annual return. How much should he set aside?
A)     \$627.93
B)     \$697.00
C)     \$823.15
D)     \$531.81

5.     Mr. Fish wants to build a house in 10 years. He estimates that the total cost will be \$170,000. If he can put aside \$10,000 at the end of each year, what rate of return must he earn in order to have the amount needed?
A)     Between 11% and 12%
B)      Between 8% and 9%
C)     17%
D)     None of the above

6.     Mr. Darden is selling his house for \$165,000. He bought it for \$55,000 nine years ago. What is the annual return on his investment?
A)     3%
B)     Between 14% and 16%
C)      13%
D)     None of the above

7.     Increasing the number of periods will increase all of the following EXCEPT:
A)     the present value of an annuity
B)     the present value of \$1
C)     the future value of \$1
D)     the future value of an annuity
Submitted: 8 years ago.
Category: Homework
Expert:  Finance Expert replied 8 years ago.