1. Ellen now has $125.

How much would she have after 8 years if she

leaves it invested at 8.5% with annual compounding?

2. Jose now has $500. How much would he have after 6 years if he
leaves it invested at 5.5% with annual compounding?

3. Suppose you have $1,500 and plan to purchase a 5-year certificate

of deposit (CD) that pays 3.5% interest, compounded annually. How much
will you have when the CD matures?

4. Suppose you have $2,000 and plan to purchase a 10-year

certificate of deposit (CD) that pays 6.5% interest, compounded
annually. How much will you have when the CD matures?

1
. (4.2) FV of a lump sum C J Answer: d EASY

N 8
I/YR 8.5%
PV $125
PMT $0
FV $240.08

2
. (4.2) FV of a lump sum C J Answer: d EASY

N 6
I/YR 5.5%
PV $500
PMT $0
FV $689.42

3
. (4.2) FV of a lump sum C J Answer: a EASY

N 5
I/YR 3.5%
PV $1,500
PMT $0
FV $1,781.53

4
. (4.2) FV of a lump sum C J Answer: a EASY

N 10
I/YR 6.5%
PV $2,000
PMT $0
FV $3,754.27
 5. Last year Rocco Corporation's sales were $225 million. If sales
grow at 6% per year, how large (in millions) will they be 5 years
later?

6. Last year Tempe Corporation's sales were $525 million. If sales

grow at 7.5% per year, how large (in millions) will they be 8 years
later?

7. How much would $1, growing at 3.5% per year, be worth after 75
years?

8. How much would $100, growing at 5% per year, be worth after 75

years?

5
. (4.2) FV of a lump sum C J Answer: c EASY

N 5
I/YR 6.0%
PV $225.00
PMT $0.00
FV $301.10

6
. (4.2) FV of a lump sum C J Answer: c EASY

N 8
I/YR 7.5%
PV $525.00
PMT $0.00
FV $936.33

7
. (4.2) FV of a lump sum C J Answer: b EASY

N 75
I/YR 3.5%
PV $1.00
PMT $0.00
FV $13.20

8
. (4.2) FV of a lump sum C J Answer: b EASY

N 75
I/YR 5.0%
PV $100.00
PMT $0.00
 9. You deposit $1,000 today in a savings account that pays 3.5%
interest, compounded annually. How much will your account be worth at
the end of 25 years?

10. You deposit $500 today in a savings account that pays 3.5%
interest, compounded annually. How much will your account be worth at
the end of 25 years

11. Suppose a State of New York bond will pay $1,000 ten years from
now. If the going interest rate on these 10-year bonds is 5.5%, how
much is the bond worth today?

12. Suppose a State of California bond will pay $1,000 eight years
from now. If the going interest rate on these 8-year bonds is 5.5%,
how much is the bond worth today?

FV $3,883.27

9
. (4.2) FV of a lump sum C J Answer: b EASY

N 25
I/YR 3.5%
PV $1,000
PMT $0
FV $2,363.24

10
. (4.2) FV of a lump sum C J Answer: b EASY

N 25
I/YR 3.5%
PV $500
PMT $0
FV $1,181.62

11
. (4.3) PV of a lump sum C J Answer: a EASY

N 10
I/YR 5.5%
PMT $0
FV $1,000.00
PV $585.43

12
. (4.3) PV of a lump sum C J Answer: a EASY

N 8
I/YR 5.5%
 13. How much would $20,000 due in 50 years be worth today if the
discount rate were 7.5%?

14. How much would $5,000 due in 25 years be worth today if the
discount rate were 5.5%?

15. Suppose a U.S. treasury bond will pay $2,500 five years from now.
If the going interest rate on 5-year treasury bonds is 4.25%, how much
is the bond worth today?

PMT $0
FV $1,000.00
PV $651.60

13
. (4.3) PV of a lump sum C J Answer: e EASY

N 50
I/YR 7.5%
PMT $0
FV $20,000
PV $537.78

14
. (4.3) PV of a lump sum C J Answer: e EASY

N 25
I/YR 5.5%
PMT $0
FV $5,000
PV $1,311.17

15
. (4.3) PV of a lump sum C J Answer: b EASY

N 5
I/YR 4.25%
PMT $0
FV $2,500.00
PV $2,030.30
 16. Suppose an ExxonMobil Corporation bond will pay $4,500 ten years
from now. If the going interest rate on safe 10-year bonds is 4.25%,
how much is the bond worth today

17. Suppose the U.S. Treasury offers to sell you a bond for $747.25.
No payments will be made until the bond matures 5 years from now, at
which time it will be redeemed for $1,000. What interest rate would
you earn if you bought this bond at the offer price?

18. Suppose the U.S. Treasury offers to sell you a bond for $3,000.
No payments will be made until the bond matures 10 years from now, at
which time it will be redeemed for $5,000. What interest rate would
you earn if you bought this bond at the offer price

(4.4) Growth rate C J Answer: b EASY

19. Ten years ago, Spielberg Inc. earned $0.50 per share. Its
earnings this year were $2.20. What was the growth rate in earnings
per share (EPS) over the 10-year period

16
. (4.3) PV of a lump sum C J Answer: b EASY

N 10
I/YR 4.25%
PMT $0
FV $4,500.00
PV $2,967.92

17
. (4.4) Finding I C J Answer: d EASY

N 5
PV $747.25
PMT $0
FV $1,000.00
I/YR 6.00%

18
. (4.4) Finding I C J Answer: d EASY

N 10
PV $3,000.00
PMT $0
FV $5,000.00
I/YR 5.24%

19
. (4.4) Growth rate C J Answer: b EASY

N 10
PV $0.50
PMT $0
FV $2.20
I/YR 15.97%
(4.4) Growth rate C J Answer: b EASY
20. Five years ago, Greenery Inc. earned $1.50 per share. Its
earnings this year were $3.20. What was the growth rate in earnings
per share (EPS) over the 5-year period?

a. 15.54%
b. 16.36%
c. 17.18%
d. 18.04%
e. 18.94%

(4.5) Finding N C J Answer: e EASY

21. Wendy has $5,000 invested in a bank that pays 3.8% annually. How
long will it take for her funds to triple?

a. 23.99
b. 25.26
c. 26.58
d. 27.98
e. 29.46

20
. (4.4) Growth rate C J Answer: b EASY

N 5
PV $1.50
PMT $0
FV $3.20
I/YR 16.36%

21
. (4.5) Finding N C J Answer: e EASY

I/YR 3.8%
PV $5,000.00
PMT $0
FV $15,000.00
N 29.46
(4.5) Finding N C J Answer: e EASY
22. Chuck has $2,500 invested in a bank that pays 4% annually. How
long will it take for his funds to double?

a. 14.39
b. 15.15
c. 15.95
d. 16.79
e. 17.67

(4.5) Finding N C J Answer: d EASY

23. Last year Ellis Inc's earnings per share were $3.50, and its
growth rate during the prior 5 years was 9.0% per year. If that growth
rate were maintained, how many years would it take for Ellis’ EPS to
triple?

a. 9.29
b. 10.33
c. 11.47
d. 12.75
e. 14.02

22
. (4.5) Finding N C J Answer: e EASY

I/YR 4.0%
PV $2,500.00
PMT $0
FV $5,000.00
N 17.67

23
. (4.5) Finding N C J Answer: d EASY

I/YR 9.0%
PV $3.50
PMT $0
FV $10.50
N 12.75
(4.5) Finding N C J Answer: e EASY
24. You plan to invest in securities that pay 8.0%, compounded
annually. If you invest $5,000 today, how many years will it take for
your investment to grow to $9,140.20?

a. 5.14
b. 5.71
c. 6.35
d. 7.05
e. 7.84

(4.5) Finding N C J Answer: e EASY

25. You plan to invest in bonds that pay 6.0%, compounded annually.
If you invest $10,000 today, how many years will it take for your
investment to grow to $30,000?

a. 12.37
b. 13.74
c. 15.27
d. 16.97
e. 18.85

(4.7) FV of ordinary annuity C J Answer: c EASY

26. You want to buy a new sports car 3 years from now, and you plan
to save $4,200 per year, beginning one year from today. You will

24
. (4.5) Finding N C J Answer: e EASY

I/YR 8.0%
PV $5,000.00
PMT $0
FV $9,140.20
N 7.84

25
. (4.5) Finding N C J Answer: e EASY

I/YR 6.0%
PV $10,000.00
PMT $0
FV $30,000.00
N 18.85

26
. (4.7) FV of ordinary annuity C J Answer: c EASY

N 3
I/YR 5.2%
PV $0.00
PMT $4,200
 deposit your savings in an account that pays 5.2% interest. How much
will you have just after you make the 3rd deposit, 3 years from now?

a. $11,973
b. $12,603
c. $13,267
d. $13,930
e. $14,626

(4.7) FV of ordinary annuity C J Answer: c EASY

27. You want to buy a new ski boat 2 years from now, and you plan to
save $8,200 per year, beginning one year from today. You will deposit
your savings in an account that pays 6.2% interest. How much will you
have just after you make the 2nd deposit, 2 years from now?

a. $15,260
b. $16,063
c. $16,908
d. $17,754
e. $18,642

FV $13,266.56

27
. (4.7) FV of ordinary annuity C J Answer: c EASY

N 2
I/YR 6.2%
PV $0.00
PMT $8,200
FV $16,908
(4.7) FV of ordinary annuity C J Answer: a EASY
28. You want to go to Europe 5 years from now, and you can save
$3,100 per year, beginning one year from today. You plan to deposit
the funds in a mutual fund that you think will return 8.5% per year.
Under these conditions, how much would you have just after you make the
5th deposit, 5 years from now?

a. $18,369
b. $19,287
c. $20,251
d. $21,264
e. $22,327

(4.8) FV of annuity due C J Answer: a EASY

29. You want to quit your job and go back to school for a law degree
4 years from now, and you plan to save $3,500 per year, beginning
immediately. You will make 4 deposits in an account that pays 5.7%
interest. Under these assumptions, how much will you have 4 years from
today?

a. $16,112
b. $16,918
c. $17,763
d. $18,652
e. $19,584

(4.8) FV of annuity due C J Answer: c EASY

30. You want to quit your job and return to school for an MBA degree
3 years from now, and you plan to save $7,000 per year, beginning

28
. (4.7) FV of ordinary annuity C J Answer: a EASY

N 5
I/YR 8.5%
PV $0.00
PMT $3,100
FV $18,369

29
. (4.8) FV of annuity due C J Answer: a EASY

BEGIN Mode
N 4 Alternative setup:
I/YR 5.7% 0 1 2 3 4
PV $0.00 $3,500 $3,500 $3,500 $3,500
PMT $3,500 FV = $16,112
FV $16,112

30
. (4.8) FV of annuity due C J Answer: c EASY

BEGIN Mode
N 3 Alternative setup:
I/YR 5.2% 0 1 2 3
PV $0.00 $7,000 $7,000 $7,000 $7,000
PMT $7,000 FV = $23,261
 immediately. You will make 3 deposits in an account that pays 5.2%
interest. Under these assumptions, how much will you have 3 years from
today?

a. $20,993
b. $22,098
c. $23,261
d. $24,424
e. $25,645

(4.9) PV of ordinary annuity C J Answer: e EASY

31. What is the PV of an ordinary annuity with 10 payments of $2,700
if the appropriate interest rate is 5.5%?

a. $16,576
b. $17,449
c. $18,367
d. $19,334
e. $20,352

(4.9) PV of ordinary annuity C J Answer: e EASY

32. What is the PV of an ordinary annuity with 5 payments of $4,700
if the appropriate interest rate is 4.5%?

a. $16,806
b. $17,690
c. $18,621
d. $19,601
e. $20,633

FV $23,261

31
. (4.9) PV of ordinary annuity C J Answer: e EASY

N 10
I/YR 5.5%
PMT $2,700
FV $0.00
PV $20,352

32
. (4.9) PV of ordinary annuity C J Answer: e EASY

N 5
I/YR 4.5%
PMT $4,700
FV $0.00
PV $20,633
(4.9) PV of ordinary annuity C J Answer: e EASY
33. You have a chance to buy an annuity that pays $2,500 at the end
of each year for 3 years. You could earn 5.5% on your money in other
investments with equal risk. What is the most you should pay for the
annuity?

a. $5,493.71
b. $5,782.85
c. $6,087.21
d. $6,407.59
e. $6,744.83

(4.9) PV of ordinary annuity C J Answer: e EASY

34. You just inherited some money, and a broker offers to sell you an
annuity that pays $5,000 at the end of each year for 20 years. You
could earn 5% on your money in other investments with equal risk. What
is the most you should pay for the annuity?

a. $50,753
b. $53,424
c. $56,236
d. $59,195
e. $62,311

(4.9) PV of ordinary annuity C J Answer: b EASY

35. Your aunt is about to retire, and she wants to sell some of her
stock and buy an annuity that will provide her with income of $50,000
per year for 30 years, beginning a year from today. The going rate on

33
. (4.9) PV of ordinary annuity C J Answer: e EASY

N 3
I/YR 5.5%
PMT $2,500
FV $0.00
PV $6,744.83

34
. (4.9) PV of ordinary annuity C J Answer: e EASY

N 20
I/YR 5.0%
PMT $5,000
FV $0.00
PV $62,311

35
. (4.9) PV of ordinary annuity C J Answer: b EASY

N 30
I/YR 7.25%
PMT $50,000
FV $0.00
PV $605,183
 such annuities is 7.25%. How much would it cost her to buy such an
annuity today?

a. $574,924
b. $605,183
c. $635,442
d. $667,214
e. $700,575

(4.9) PV of annuity due C J Answer: a EASY

36. What is the PV of an annuity due with 5 payments of $2,500 at an
interest rate of 5.5%?

a. $11,262.88
b. $11,826.02
c. $12,417.32
d. $13,038.19
e. $13,690.10

(4.9) PV of annuity due C J Answer: c MEDIUM

37. You have a chance to buy an annuity that pays $550 at the
beginning of each year for 3 years. You could earn 5.5% on your money
in other investments with equal risk. What is the most you should pay
for the annuity?

a. $1,412.84
b. $1,487.20
c. $1,565.48
d. $1,643.75
e. $1,725.94

36
. (4.9) PV of annuity due C J Answer: a EASY

BEGIN Mode
N 5
I/YR 5.5%
PMT $2,500
FV $0.00
PV $11,262.88

37
. (4.9) PV of annuity due C J Answer: c MEDIUM

BEGIN Mode
N 3
I/YR 5.5%
PMT $550
FV $0.00
PV $1,565.48
(4.9) PV of annuity due C J Answer: c MEDIUM
38. You have a chance to buy an annuity that pays $5,000 at the
beginning of each year for 5 years. You could earn 4.5% on your money
in other investments with equal risk. What is the most you should pay
for the annuity?

a 20,701
b. $21,791
c. $22,938
d. $24,085
e. $25,289

(4.9) PV of annuity due C J Answer: d MEDIUM

39. Your uncle is about to retire, and he wants to buy an annuity
that will provide him with $75,000 of income a year for 20 years, with
the first payment coming immediately. The going rate on such annuities
is 5.25%. How much would it cost him to buy the annuity today?

a. $825,835
b. $869,300
c. $915,052
d. $963,213
e. $1,011,374

38
. (4.9) PV of annuity due C J Answer: c MEDIUM

BEGIN Mode
N 5
I/YR 4.5%
PMT $5,000
FV $0.00
PV $22,938

39
. (4.9) PV of annuity due C J Answer: d MEDIUM

BEGIN Mode
N 20
I/YR 5.25%
PMT $75,000
FV $0.00
PV $963,213
(4.9) PV of annuity due C J Answer: d MEDIUM
40. Your father is about to retire, and he wants to buy an annuity
that will provide him with $85,000 of income a year for 25 years, with
the first payment coming immediately. The going rate on such annuities
is 5.15%. How much would it cost him to buy the annuity today?

a. $1,063,968
b. $1,119,966
c. $1,178,912
d. $1,240,960
e. $1,303,008

(4.9) PV of annuity due C J Answer: b MEDIUM

41. You inherited an oil well that will pay you $25,000 per year for
25 years, with the first payment being made today. If you think a fair
return on the well is 7.5%, how much should you ask for it if you
decide to sell it?

a. $284,595
b. $299,574
c. $314,553
d. $330,281
e. $346,795

(4.9) PV of annuity due C J Answer: b MEDIUM

42. Sam was injured in an accident, and the insurance company has
offered him the choice of $25,000 per year for 15 years, with the first

40
. (4.9) PV of annuity due C J Answer: d MEDIUM

BEGIN Mode
N 25
I/YR 5.15%
PMT $85,000
FV $0.00
PV $1,240,960

41
. (4.9) PV of annuity due C J Answer: b MEDIUM

BEGIN Mode
N 25
I/YR 7.5%
PMT $25,000
FV $0.00
PV $299,574

42
. (4.9) PV of annuity due C J Answer: b MEDIUM

BEGIN Mode
N 15
I/YR 7.5%
PMT $25,000
FV $0.00
PV $237,229
 payment being made today, or a lump sum. If a fair return is 7.5%, how
large must the lump sum be to leave him as well off financially as with
the annuity?

a. $225,367
b. $237,229
c. $249,090
d. $261,545
e. $274,622

(4.9) PV of ord. ann. & end. pmt. C J Answer: e MEDIUM

43. What’s the present value of a 4-year ordinary annuity of $2,250
per year plus an additional $3,000 at the end of Year 4 if the interest
rate is 5%?

a. $8,509
b. $8,957
c. $9,428
d. $9,924
e. $10,446

43
. (4.9) PV of ord. ann. & end. pmt. C J Answer: e MEDIUM
Alternative setup:
N 4 0 1 2 3 4
I/YR 5.0% $2,250 $2,250 $2,250 $2,250
PMT $2,250 $3,000
FV $3,000 $2,250 $2,250 $2,250 $5,250
PV $10,446 PV = $10,446.50
(4.10) Payments on ord. annuity C J Answer: a MEDIUM
44. Suppose you inherited $275,000 and invested it at 8.25% per year.
How much could you withdraw at the end of each of the next 20 years?

a. $28,532
b. $29,959
c. $31,457
d. $33,030
e. $34,681

(4.10) Payments on ord. annuity C J Answer: d MEDIUM

45. Your uncle has $375,000 and wants to retire. He expects to live
for another 25 years and to earn 7.5% on his invested funds. How much
could he withdraw at the end of each of the next 25 years and end up
with zero in the acaccount

46. Your uncle has $375,000 and wants to retire. He expects to live
for another 25 years, and he also expects to earn 7.5% on his invested
funds. How much could he withdraw at the beginning of each of the next
25 years and end up with zero in the account?

47. Your grandmother just died and left you $100,000 in a trust fund
that pays 6.5% interest. You must spend the money on your college

44
. (4.10) Payments on ord. annuity C J Answer: a MEDIUM

N 20
I/YR 8.25%
PV $275,000
FV $0.00
PMT $28,532

45
. (4.10) Payments on ord. annuity C J Answer: d MEDIUM

N 25
I/YR 7.5%
PV $375,000
FV $0.00
PMT $33,641.50

46
. (4.10) Payments on annuity due C J Answer: c MEDIUM

BEGIN Mode
N 25
I/YR 7.5%
PV $375,000
FV $0.00
PMT $31,294.42

47
. (4.10) Payments on annuity due C J Answer: c MEDIUM

BEGIN Mode
N 4
I/YR 6.5%
 education, and you must withdraw the money in 4 equal installments,
beginning immediately. How much could you withdraw today and at the
beginning of each of the next 3 years and end up with zero in the
account?

48. Suppose you inherited $275,000 and invested it at 8.25% per year.
How much could you withdraw at the beginning of each of the next 20
years?

PV $100,000
FV $0.00
PMT $27,409

48
. (4.10) Payments on annuity due C J Answer: d MEDIUM

BEGIN Mode
N 20
I/YR 8.25%
PV $275,000
FV $0.00
PMT $26,357.92