FE Practice Problems

4-114 1 If you borrow $3,000 at 6% simple interest per year for seven years, how much will you have to repay at the end of seven years? [4.4] (a) $3,000 (b) $4,511 (c) $1,260 (d) $1,511 (e) $4,260

4-115 When you were born, your grandfather established a trust fund for you in the Cayman islands. The account has been earning interest at the rate of 10% per year. If this account will be worth $100,000 on your 25th birthday, how much did your grandfather deposit on the day you were born? [4.8]

(a) $4,000 (b) $9,230 (c) $10,000 (d) $10,150 (e) $10,740

Every year you deposit $2,000 into an account that earns 2% interest per year. What will be the balance of your account immediately after the 30th deposit? [4.9]

(a) $44,793 (b) $60,000 (c) $77,385 (d) $81,136 (e) $82,759

4-117 Your monthly mortage payment (principal plus interest) is $1,500. if you have a 30-year loan with a fixed interest rate of 6% compounded monthly, how much did you borrow from the bank to purchase your house? Select the closest answer. [4.17]

(a) $154,000 (b) $180,000 (c) $250,000 (d) $300,000 (e) $540,000

4-118 Condider the following sequence of year-end cash flows: EOY 1 2 3 4 5 Cash Flow $8,000 $15,000 $22,000 $29,000 $36,000 What is the uniform annual equivalent if the interest rate is 12% per year? [4.13] (a) $20,422 (b) $17,511 (c) $23,204 (d) $22,000 (e) $12,422

1 Problems choosen from Engineering Economy, 13th Edition, Sullivan, W.G., et.al., Prentice-Hall, 2006

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4-119 A cash flow at time zero (now) of $9,982 is equivalent to another cash flow that is an end-of-year annuity of $2,500 over five years. Each of these two cash flows series is equivalent to a third series, which is a uniform gradient series. What is the value of G for this third series over the same five year time interval? [4.13] (a) $994 (b) $1,150 (c) $1,250 (d) $1,354 (e) not enough information

4-120 What is the monthly payment on a loan of $30,000 for seven years at a nominal interest rate of 9% compounded monthly? [4.17] (a) $4,416 (b) $258 (c) $483 (d) $2,700 (e) $225

4-121 A bank advertises mortgages at 12% compounded continuously. What is the effective annual interest? [4.18] (a) 12.36% (b) 12.55% (c) 12.75% (d) 12.68% (e) 12.00%

4-122 If you borrow $5,000 to buy a car at 12% compounded monthly, to be repaid over the next four years, what is your monthly payment? [4.17] (a) $131 (b) $137 (c) $1,646 (d) $$81 (e) $104

4-123 If you invest $7,000 at 12% compounded continuously, h ow much would it be worth in three years? [4.18] (a) $9,449 (b) $4,883 (c) $10,033 (d) $9,834 (e) $2,520

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