Your parents are giving you $265 a month for 4 years while you are in college. At an interest rate of .33 percent per month, what are these payments worth to you when you first start college?

Your parents are giving you $265 a month for 4 years while you are in college. At an interest rate of .33 percent per month, what are these payments worth to you when you first start college?

Multiple Choice

Top of Form

$11,158.56

$13,758.26

$11,519.61

$11,354.32

$11,745.85

Correct

Bottom of Form

Explanation

PV = $265[(1 −1/1.0033^4×12)/.0033] = $11,745.85
 

Enter

4 × 12

.33%

−$265

N

I/Y

PV

PMT

FV

Solve for

$11,745.85

You want to have $2.7 million when you retire in 37 years. You feel that you can save $600 per month until you retire. What APR do you have to earn in order to achieve your goal?

Multiple Choice

Top of Form

11.28%

9.11%

Incorrect

10.97%

10.52%

9.87%

Correct

Bottom of Form

Explanation

$2,700,000 = $600{[(1 + r)⁴⁴⁴ − 1] / r}

r = .0082, or .82%

r = .82% × 12 = 9.87%

 

Enter

37 × 12

0

$600

−$2,700,000

N

I/Y

PV

PMT

FV

Solve for

.82%