1. Carlos goes to the bank to take out a personal loan. The stated annual interest rate is 8%, but interest is compounded quarterly and he will make monthly payments. What is the EAR?

A. 8.24%

B. 2.00%

C. 4.00%

D. 8.00%

EAR=(1+8%/4)^4-1=8.24%

2. Gloria is 35 and trying to plan for retirement. She has put a budget together and plans to save $4,000 per year, starting at the end of this year, in a retirement fund until she is 61. Assume that she can make 5.5% on her account. How much will she have for retirement at age 61?

A. $235,956.44

B. $219,863.92

C. $109,355.04

D. $104,000.00

FV(0.055, 26, -4000)=219863.92

选B

3. Dominique has just turned 60 and she has deposited her annual payment of $15,000 into her retirement account. She made her first such saving deposit into this fund on her 32nd birthday. Dominique has also retired and wants to figure out how much money she has in her retirement account for her retired life. You are Dominique's friend who knows finance. How much is Dominique's savings worth today given that the fund has earned an annual return of 4.5%? (Enter just the number in dollars without the $ sign or a comma and round off decimals to the closest integer, i.e., rounding $30.49 down to $30 and rounding $30.50 up to $31.)

started depositing from 32nd birthday, mark this as Year 1, Year 0 should be 31 years old. So the total depositing years should be 29 years

FV(0.045，29，-15000)=861346

4. Gerard has estimated that he is going to need enough in his retirement fund to withdraw $75,000 per year beginning on his 66th birthday and for 19 additional years thereafter. How much will Gerard need in his retirement account at age 65 if his fund is expected to earn an annual return of 8.0%?

A. $720,269.94

B. $722,560.34

C. $736,361.06

D. $1,500,000.00

PV(0.08, 20, 75000)=736361.06

选C

5. Huiling owns a rental property on Main street, but she is considering selling the property to another real estate investor. In preparation for negotiating a price, Huiling wants to know the value of the property. The Net Operating Income (NOI) is the cash flow from real estate and the Cap Rate is the rate, where NOI is rental revenue less all expenses except loan servicing. The property has an NOI of $20,000 per year. The local real estate market has a cap rate of 5%. What is a fair price for the property assuming that the building's remaining life is 35 years? (Enter just the number in dollars without the $ sign or a comma and round off decimals to the closest integer, i.e., rounding $30.49 down to $30 and rounding $30.50 up to $31.)

PV(0.05, 35, -20000)=327,484

6. Melanie and Stephen Jackson are purchasing their first house. The house costs $400,000. They have put a 10% down payment (that is, an amount that banks should require you to pay out-of-pocket), but will therefore finance the rest. They are considering a fixed rate 15-year mortgage at a 7.75% APR with monthly payments. How much will the Jacksons' first monthly payment be?

A. $2,325.00

B. $3,451.57

C. $2,831.81

D. $3,388.59

Down payment=40,000

Rest:360,000

pmt(0.0775/12, 15*12, 360000)=3388.59

选D

7. Abebi, who has just celebrated her 30th birthday, will retire on her 62nd birthday, and she has just set up a retirement plan to pay her income starting on her retirement day, and to continue paying for 19 more years. Abebi's goal is to receive $120,000 for each of these twenty years. In creating her retirement account, Abebi has committed to set aside equal investments at the end of each year, for the next 31 years starting on her 31st birthday. If the annual interest rate is 8%, how big should Abebi's equal investments be? (Enter just the number in dollars without the $ sign or a comma and round off decimals to the closest integer, i.e., rounding $30.49 down to $30 and rounding $30.50 up to $31.)

at 61st birthday: PV(0.08，20，-120000)=1178177.69

pmt(0.08, 31,0, 1178177.69)=-9551.82

8. Two years ago Abilia purchased a $13,000 car; she paid $2,500 down and borrowed the rest. She took a fixed rate 60-month installment loan at a stated rate of 7.0% per year. Interest rates have fallen during the last two years and she can refinance her car by borrowing the amount she still owes on the car at a new fixed rate of 4% per year for 3 years. Should Abilia refinance her loan? How much will she save per month for the remainder of the loan life if she decides to refinance?

A. No, lose $9.11

B. Yes, save $9.11

C. No, lose $20.87

D. Yes, save $20.87

Rest Money= 13000-2500=10500

pmt(old)=pmt(0.07/12, 60, 10500)=207.91

PV(0.07/12, 36, 207.91)= 6733.55

pmt(new)=pmt(0.04/12, 36, 6733.55)=198.80

saved 207.91-198.80=9.11

选B

9. You have been living in the house you bought 9 years ago for $400,000. At that time, you took out a loan for 80% of the house at a fixed rate 20-year loan at an annual stated rate of 7.5%. You have just paid off the 108th monthly payment. Interest rates have meanwhile dropped steadily to 4.5% per year, and you think it is finally time to refinance the remaining balance over the residual loan life. But there is a catch. The fee to refinance your loan is $4,000. Should you refinance the remaining balance? How much would you save/lose if you decided to refinance?

A. Yes, gain $32,765.25

B. No, lose $32,765.25

C. Yes, gain $36,765.25

D. No, lose $36,765.25

Loan=320,000, nper=240, paid nper=108, remaining nper=132, refinance fee=4000

pmt(old)=pmt(0.075/12, 240, 320000)=2577.9

PV(0.075/12, 132, 2577.9)=231243.01

pmt(new)=pmt(0.045/12, 132, 231243.01)=2224.26

pmt difference(saving)=353.63

PV saving=PV(0.045/12, 132, 353.63)=36765.25

then 4000 refinance fee is requested, hence the PV saving is 32765.25

选A

10. You are interested in a new Ford Taurus. After visiting your Ford dealer, doing your research on the best leases available, you have three options. (i) Purchase the car for cash and receive a $1,800 cash rebate from Dealer A. The price of the car is $18,000. (ii) Lease the car from Dealer B. Under this option, you pay the dealer $500 now and $225 a month for each of the next 36 months (the first $225 payment occurs 1 month from today). After 36 months you may buy the car for $10,100. (iii) Purchase the car from Dealer C who will lend you the entire purchase price of the car for a zero interest 36-month loan with monthly payments. The car price is $18,000. Suppose the market interest rate is 6%. What is the net cost today of the cheapest option? (Enter just the number in dollars without the $ sign or a comma and round off decimals to the closest integer, i.e., rounding $30.49 down to $30 and rounding $30.50 up to $31.)

Comparing the data, the cheapest one is Plan A