If an investor deposits $1000 now, $3000 three years from now, and $600 per year for 5 years starting 4 years from now, how much money can be withdrawn every year forever beginning 12 years from now, if the rate of return on the investment is 8%.

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Darryn D'SouzaLv10

28 Sep 2019

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17) A $50,000 municipal bond has an interest rate of 6% per year, compounded semiannually. The bond will mature in 10 years. If the market interest rate is 8% per year compounded semiannually, a person purchasing the bond should be willing to pay:

a. An amount less than $50,000

b. $50,000

c. An amount greater than $50,000

d. The amount cannot be determined from the information provided

18) Two mutually exclusive alternatives, A and B, are to be evaluated by the ROR method. The initial investment for alternative B is greater than that of alternative A. If the overall ROR of both alternatives A, and B, is greater than the MARR, then:

a. Select alternative A because it has a lower initial investment cost.

b. Select alternative B because it has a higher initial investment cost.

c. Conduct an incremental analysis and select A if the ROR of the increment exceeds the MARR

d. Conduct an incremental analysis and select B if the ROR on the increment exceeds the MARR.

19) A person purchases a $5,000, 5% per year bond, with interest payable semiannually, for the amount of $4,000. The bond has a maturity date of 14 years from now. The equation for calculating how much the person must sell the bond for 6 years from now in order to make a rate of return of 12% per year, compounded semiannually, is:

a. 0 = 4,000 + 125(P/A,6%,12) + x(P/F,6%,12)

b. 0 = 4,000 + 100(P/A,6%,12) + x(P/F,6%,12)

c. 0 = 5,000 + 125(P/A,6%,12) + x(P/F,6%,12)

d. 0 = 4,000 + 125(P/A,12%,6) + x(P/F,12%,6)

20) How much must you deposit in your retirement account each year for 10 years starting now (i.e., years 0 through 9) if you want to be able to withdraw $50,000 per year forever beginning 30 years from now? Assume the account earns interest at 10% per year.

a. $4,239

b. $4,662

c. $4,974

d. $5,471