CHAPTER 1
CHAPTER 1
Unit 1.1 Reading, writing, and rounding numbers
1. Change the number 7,398,246 to words.
A. Seven million, three hundred ninety-eight thousand and two hundred forty six hundredths.
B. Seven billion, three hundred ninety-eight million, two hundred forty-six.
C. Seven million, three hundred ninety-eight thousand, two hundred forty-six.
D. Seven billion, three hundred ninety-eight thousand and two hundred forty-six thousandths.
2. Change the number 8.06 to words.
A. Eight and six-tenths B. Eight and six-hundredths
C. Eight and six-thousandths D. Eight hundred six
3. Change “Eight hundred forty-two thousandths” to a number.
A. .842 B. 842,000 C. 800.042 D. 800.42
4. Change “Four hundred and fifty-seven thousandths” to a number.
A. 457,000 B. .457 C. 400.57 D. 400.057
5. Change 46.2 trillion to a regular number.
A. 46,200,000 B. 46.2
C. 46,200,000,000 D. 46,200,000,000,000
6. Round 18.3267 to the nearest thousandth.
A. 18.33 B. 18.327 C. 18.326 D. 18.3267
7. Round $87,288.59 to the nearest dollar.
A. $87,000 B. $87,289 C. $87,288 D. $87,300
8. Round 17,257 to the nearest hundred.
A. 17,000 B. 17,200 C. 17,300 D. 17,260
Unit 1.2 Working with whole numbers
9. Find the sum: 42,899 + 45 + 3,587
A. 46,531 B. 45,631 C. 46,421 D. 46,521
10. Find the difference: 851 – 87
A. 874 B. 774 C. 764 D. 938
11. Multiply: 318 ( 48
A. 1,598 B. 366 C. 3,816 D. 15,264
12. Multiply: 6,300 ( 80
A. 504,000 B. 504 C 50,400 D. 6,380
13. Divide: 3,487 ( 23. Indicate any remainder.
A. 152 B. 151, R61 C. 151, R14 D. 151
Unit 1.3 Strategy for solving word problems
14. You buy a car for $18,700 and the dealer gives you a $5,350 trade-in on your old car. What is the net amount you owe the dealer?
A. $13,350 B. $24,050 C. $13,400 D. $24,000
15. A movie theater has 46 seats in each row. If there are a total of 62 rows, what is the total number of seats?
A. 108 seats B. 2,582 seats C. 118 seats D. 2,852 seats
16. You are ordering soda pop for your company picnic. There are 192 people coming to the picnic and you think each person will drink about 2 cans of soda pop. How many 24-can cases do you need?
A. 4 cases B. 384 cases C. 9,216 cases D. 16 cases
17. You are buying a few things at a convenience store: milk for $3.75, cereal for $5.25, and potato chips for $3.65. Estimate the total by rounding each amount to the nearest dollar.
A. $11 B. $12 C. $13 D. $14
Unit 1.4 Working with decimal numbers
18. Find the result: 148 + 233.4 + 123.792 + 1.35
A. 506.54 B. 506.542 C. 126,409 D. 507
19. Find the result: 12,834 - 192.487
A. -179,653 B. 179,653 C. 13,026.487 D. 12,641.513
20. Find the result: 131.62 ( 4.8
A. 631.776 B. 6,317.76 C. 631.78 D. 6,317.80
21. Find the result: 841.184 ( 32
A. 26.29 B. 26,287 C. 26.287 D. 809.184
22. Find the result: 814.912 ( 6.8
A. 119.84 B. 808.112 C. 11,984 D. 119,840
23. Find the result: 87 ( 1,000
A. 87,000 B. 870,000 C. 8,700 D. 1,087
24. Find the result: 9.3 ( 100
A. 930 B. 93 C. .93 D. .093
25. You buy 3 items at the grocery store: butter for $4.28, eggs for $1.69, and wheat bread for $3.65. You are charged $0.60 sales tax. You give the cashier $20. How much change will you get?
A. $10.22 B. $9.78 C. $9.62 D. $10.38
26. If roofing material costs $1.10 per square foot, and installation costs $0.50 per square foot, what is the total cost for 1,450 square feet of roofing?
A. $1.60 B. $1,451.60 C. $1,595 D. $2,320
27. Kurt Schrenk is a traveling salesman. His employer reimburses him for car mileage at $0.35 per mile. If Kurt drove 1,487.2 miles during July, how much will he receive from his employer?
A. $52,052 B. $1,487.55 C. $520.52 D. $52.05
28. A company has 128.52 square feet (sq ft) of fabric from which it makes shirts. If each shirt requires 8.3 sq ft of fabric, how many full shirts can be made?
A. 15 full shirts B. 1,066 full shirts C. 120 full shirts D. 136 full shirts
Challenge problems
29. Your auto mileage was 13,652.7 at the beginning of a trip and 15,122.8 at the end of the trip. You filled your tank prior to leaving town by putting in 15.2 gallons of gas, and bought the following amounts of gas during the trip: 14.8 gallons, 17.3 gallons, 19.8 gallons, 17.6 gallons, 20.1 gallons, and 12.3 gallons to fill your tank when you got home. How many miles per gallon, rounded to the nearest tenth, did you get on the trip?
A. 14.4 mpg B. 12.6 mpg C. 16.4 mpg D. 1,470.1 mpg
30. You rent a car for 3 days. You are charged $35 per day plus 14¢ per mile. If the mileage was 9,378.2 when you rented the car and 9,942.1 when you returned the car, what is the total amount you will owe for the 3 days?
A. $105 B. $78.95 C. $113.95 D. $183.95
31. Assuming the average heartbeat is 73 beats per minute, how many beats are there in a 75-year life (assume an average of 365.25 days per year)?
A. 105,120 beats B. 38,395,080 beats
C. 2,879,631,000 beats D. 172,777,860,000 beats
32. A warehouse rents for $5,236 per month. Assuming that the warehouse contains 9,520 square feet (sq ft), calculate the annual rent per square foot.
A. $0.55 per sq ft B. $1.82 per sq ft C. $6.60 per sq ft D. $0.15 per sq ft
33. Annie Phipps weighed 163 pounds 5 months ago and now weighs 138 pounds. On average, how many pounds per month did Annie lose?
A. 25 pounds B. 5 pounds C. 27.6 pounds D. 32.6 pounds
34. The Knight family is planning a vacation. They will be gone 18 days. They estimate that lodging will cost an average of $85 per night (they will need lodging for only 17 nights since they will get back on the 18th day). Meals will average $22 per person per day (there are 4 people in the family). They will drive about 2,400 miles. Their vehicle gets about 30 miles per gallon, and they estimate gas will cost an average of $4.38 per gallon. They want to allow $50 per day for entertainment. What total amount should they budget for their trip?
A. $4,279.40 B. $3,091.40 C. $3,176.40 D. $4,364.40
CHAPTER 2
Unit 2.1 Types of fractions and modifying fractions
1. In the fraction [pic], the denominator is 8. (T or F)
The fraction [pic] is classified as:
A. Proper fraction B. Improper fraction C. Mixed number D. Decimal number
Change [pic] to an improper fraction.
A. [pic] B. [pic] C. [pic] D. [pic]
Change [pic] to a mixed number.
A. [pic] B. [pic] C. [pic] D. [pic]
Find the new numerator so that the fractions are equivalent: [pic]
A. 19 B. 15 C. 12 D. 16
Reduce [pic]
A. [pic] B. [pic] C. [pic] D. [pic]
Reduce [pic]
A. [pic] B. [pic] C. [pic] D. [pic]
Unit 2.2 Working with fractions and mixed numbers
Find the result and reduce: [pic]
A. [pic] B. [pic] C. [pic] D. [pic]
Find the result and reduce: [pic]
A. [pic] B. [pic] C. [pic] D. [pic]
Find the result and reduce: [pic]
A. [pic] B. [pic] C. [pic] D. [pic]
Find the result and reduce: [pic]
A. [pic] B. [pic] C. [pic] D. [pic]
Find the result and reduce: [pic]
A. [pic] B. [pic] C. 1 D. [pic]
Find the result and reduce: [pic]
A. [pic] B. [pic] C. [pic] D. [pic]
Find the result and reduce: [pic]
A. [pic] B. [pic] C. [pic] D. [pic]
Find the result and reduce: [pic]
A. [pic] B. [pic] C. [pic] D. [pic]
Find the result and reduce: [pic]
A. [pic] B. [pic] C. [pic] D. [pic]
A builder is trying to figure out the thickness of a floor. The floor joists are [pic] inches thick. On top of the floor joists are a [pic]-inch subfloor and [pic]-inch tile. What is the total thickness?
A. [pic] inches B. [pic] inches C. [pic] inches D. [pic] inches
A farmer owns 8 acres of land. If the farmer gives [pic] of the land to his son, how many acres does the son get?
A. [pic] acres B. [pic] acres C. [pic] acres D. [pic] acres
A package of dental floss contains 150 feet of floss. If you use [pic] feet each day, how many days should the floss last?
A. 60 days B. 375 days C. 147[pic] days D. 75 days
A-1 Firewood Company charges $140 per cord of firewood. If you order [pic] cords, what will your total cost be?
A. $80 B. $250 C. $82.50 D. $245
Rob, Jane, and Denny buy a rental property together. Rob has enough cash to buy a [pic] interest and Jane has enough to buy a [pic] interest. Denny agrees to buy the remainder. What portion will Denny own?
A. [pic] interest B. [pic] interest C. [pic] interest D. [pic] interest
Earle Emery is paid $11.50 per hour but time and one-half for Saturdays. If he works 6 hours on Saturday, how much does he earn?
A. $17.25 B. $69.00 C. $103.50 D. $87.25
Unit 2.3 Fraction/decimal conversions
Change 17.24 to a fraction or mixed number. Remember to reduce.
A. [pic] B. [pic] C. [pic] D. [pic]
Change .625 to a fraction or mixed number. Remember to reduce.
A. [pic] B. [pic] C. [pic] D. [pic]
Change [pic] to a decimal.
A. .44 B. 7.16 C. .716 D. .4375
Change [pic] to a decimal. Indicate repeating decimals.
A. .[pic] B. .55 C. .611 D. 6.[pic]
You are asked to add [pic]. You can get a precise answer by first changing each fraction to a decimal value. (T or F)
Challenge problems
You are installing a wood fence. The fence is 120 feet long. Each wood slat, to be installed vertically, is [pic] inches wide. What is the total cost of the wood slats if each slat costs $1.40? Hint: 1 foot = 12 inches.
A. $384 B. $44.80 C. $168 D. $537.60
A recipe that makes 1 loaf of wheat bread requires [pic] cup of honey. You want to make 5 loaves of bread. How much honey is required?
A. [pic] cups B. [pic] cups C. [pic] cups D. [pic] cups
Your company buys a parcel of land containing 282 acres. One-third of the land must be used for streets. Each homesite is to contain [pic] of an acre. How many building lots can the company plan?
A. 70 full lots B. 501 full lots C. 188 full lots D. 105 full lots
A shirt requires [pic] yards of fabric. How many whole shirts can be made from 92 yards of fabric?
A. 260 shirts B. 32 shirts C. 35 shirts D. 235 shirts
CHAPTER 3
Unit 3.1 Mathematical symbols and expressions
1. Which symbol means "greater than or equal to?"
A. < B. > C. ( D. (
2. (6)(2) means "6 + 2." (T or F)
3. If m < 22, m can be:
A. 22 B. 18 C. 113 D. 23
4. Write (5)(5)(5)(5) using exponents.
A. 5 ( 4 B. 5 ( 104 C. 5,555 D. 54
5. What is the value of 83 ?
A. 83 B. 24 C. 64 D. 512
6. Simplify: 4 + 3 ( 2
A. 14 B. 10 C. 13 D. 11
7. Simplify: 10 + 42
A. 196 B. 116 C. 16 D. 26
8. Simplify: 3[3 + 4(8 - 5) - 4] + 2
A. 35 B. 23 C. -23 D. -35
9. Simplify: 2 + (7 - 4) + (3 - 8) - (4 - 3) - (2 - 9)
A. 6 B. 18 C. 4 D. 13
10. Simplify: -3 -8
A. 24 B. -24 C. 11 D. -11
11. Simplify: (2)(-3)(-2)
A. -3 B. 12 C. -12 D. 3
12. Simplify: [pic]
A. 4 B. -4 C. -30 D. -18
13. Simplify: 4(3p + 4q + 2)
A. 4 + 3p + 4q + 8 B. 12 + 3p + 4q C. 28pq + 8 D. 12p + 16q + 8
14. Simplify: 2y - (y - 4)
A. 2y - 4 B. y - 4 C. y + 4 D. 3y + 4
15. Simplify: 2p + 2(3p + 2) - 3p + 5
A. 5p + 9 B. 3p + 9 C. 5p + 7 D. 14p
Unit 3.2 Equations: Solving for the unknown
16. Which of these are equations?
A. 3m + 5(2m + 2) B. y - 2 = 4 C. Both A and B D. None are equations
17. Solve: y - 5 = 12
A. 17 B. 7 C. -60 D. 60
18. Solve: 4m = 28
A. 24 B. 32 C. 112 D. 7
19. Solve: [pic]p = 12
A. [pic] B. 32 C. [pic] D. [pic]
20. Solve: 3(2r + 8) = 4r - 2(r - 4)
A. 8 B. -4 C. -8 D. 4
21. The formula “FV = PV (1 + i)n ” is used to find what an amount will grow to if earning compound interest. Assume you deposit $800 (PV = $800) for 3 years (n = 3) earning 4% interest (i = .04). Determine the amount the money will grow to.
A. $899.89 B. $832 C. $896 D. $832.74
22. The formula “FV = PV (1 + i)n ” is used to find what an amount will grow to if earning compound interest. Rewrite the formula so it is designed to solve for PV.
A. PV = [pic] B. PV = FV(1+i)n C. PV = FV n D. PV = FV (i) n
23. The formula ”I = PRT” is used to find the dollar amount of interest for a simple interest loan. Rewrite the formula so it is designed to solve for R.
A. R= IRT B. R = [pic] C. R = [pic] D. R = [pic]
Unit 3.3 Guideline for solving word problems
1. Write a phrase using symbols: 4 times b
A. 4 + b B. b + 4 C. 4b D. 4 - b
21. Write a phrase using symbols: Three times the sum of a, b, and c
A. 3(a + b + c) B. 3a + b + c C. 3 + a + b + c D. 3abc
22. Change the phrase to an equation: r plus 5 totals 4 more than t
A. r + 5 + 4 = t B. r + 5 = t + 4 C. r + 5 = 4t D. r + 5 = 4t + 4
23. Kent and Cory decide to open an accounting business. They will need a total of $50,000 to get the business started. Kent has spent a lot of time getting the business set up, so Cory agrees to contribute $12,000 more than Kent. How much money will Cory contribute?
A. $37,000 B. $38,000 C. $31,000 D. $19,000
24. You are thinking about building a home. You are told that for a particular area, the construction costs for the home should be about 4 times the cost of the land and the landscaping costs should be about [pic] of the cost of the land. If your total budget is $175,000, calculate your budget for the land.
A. $131,250 B. $10,937.50 C. $28,317.25 D. $32,812.50
25. Wen Kuo dies intestate (without a will), leaving an estate of $630,000. Wen’s heirs consist of a wife and two adult children. His state requires that, in the absence of a will, each child is to receive two-thirds as much as a spouse. How much will his wife receive?
A. $270,000 B. $472,500 C. $420,000 D. $210,000
26. Amanda Hopkins is about to open a car dealership. Her property can accommodate a total inventory of 216 vehicles. The auto manufacturer told Amanda that she should have five times as many cars as trucks. How many trucks should she order?
A. 43 B. 36 C. 180 D. 173
27. You paid $72 for a tennis racket. If you found the racket under a sign stating [pic] off, what must the original retail price have been?
A. $18 B. $90 C. $54 D. $96
Challenge problems
28. Ross Henshaw owns a ready-mix concrete company. Ross receives an order for 2.5 cubic yards of concrete. This mixture of concrete contains sand, cement, gravel, and water; for each pound (lb) of water, there are 5.5 lb of sand, 2 lb of cement, and 7.5 lb of gravel. Determine how many pounds of cement must be used, assuming a cubic yard of concrete weighs 4,000 lb.
A. 625 lb B. 1,250 lb C. 3,437.5 lb D. 4,687.5 lb
29. A certain mixture of nuts contains cashews, almonds, and macadamia nuts. Each container must include three times as many almonds as cashews and twice as many cashews as macadamia nuts. If there are a total of 15 ounces (oz) in each container, how many oz of cashews must be included?
A. [pic] oz B. [pic] oz C. 10 oz D. 3 oz
30. You are thinking about opening an automobile oil change shop. Your fixed costs will be $8,100 per month. You will charge customers $30 for a lube-oil-filter. The cost of materials is in addition to your fixed costs and is estimated at $12 per customer. How many customers must you have each month in order to break even?
A. 270 customers B. 675 customers C. 193 customers D. 450 customers
CHAPTER 4
Unit 4.1 Percent conversions
1. Convert 0.83 to a percent.
A. 8.3% B. .83% C. 83% D. 830%
2. Convert 3.855 to a percent.
A. 38.55% B. 3.855% C. .03855% D. 385.5%
3. Convert 28.424% to a decimal number.
A. .28424 B. 2,842.4 C. 28.424 D. 28,424
4. Convert [pic] to a decimal number.
A. 162.5 B. 1.625 C. 1,625 D. 16.25
5. Convert [pic] to a decimal number.
A. .78 B. .875 C. .00875 D. .0078
6. Convert [pic] to a percent.
A. 1.75% B. 175% C. 17.5% D. 1.34%
7. Convert 12.5% to a fraction and reduce.
A. [pic] B. [pic] C. [pic] D. .125
Unit 4.2 The percent formulas
8. What is 35% of 300?
A. 105 B. 857.14 C. 405 D. 195
9. 390 is 75% of what number?
A. 520 B. 292.5 C. 682.5 D. 97.5
10. 50 is what percent of 80?
A. 160% B. 50.80% C. 62.5% D. 37.5%
11. You, as a real estate agent, sell a property for $250,000. If you earn a 6% commission, what is your commission?
A. $4,166,666.67 B. $235,000 C. $15,000 D. $18,000
12. You take an exam with 18 questions and get 1 wrong. What is your score in percent? Round your answer to the nearest tenth of a percent.
A. 94.4% B. 5.6% C. 5.9% D. 94.1%
13. A "B" grade on a certain test is 85%. How many questions can you get wrong on a 30-question exam to get a B?
A. 25 questions B. 6 questions C. 5 questions D. 4 questions
14. You own a small restaurant. You are trying to determine what price you should charge for your meals. If ingredient costs should be 40% of the retail price of the meal and the ingredients for a grilled cheese sandwich cost 54¢, what should you charge customers for a grilled cheese sandwich?
A. $1.35 B. $0.76 C. $0.22 D. $0.90
15. Joe, an antiques dealer, is thinking about buying a 60-year-old rocking chair. He customarily sells antiques for 375% of cost. What price should Joe pay for the rocking chair if he thinks it will sell for $400?
A. $150 B. $106.67 C. $84.21 D. $293.33
16. You want to buy a home. You can borrow 90% of the purchase price. Assuming that you can make a down payment of $15,000, what price home can you afford?
A. $185,000 B. $150,000 C. $54,000 D. $165,500
17. The population of the largest county in a state is 1,345,000 while the population for the entire state is 4,230,000. What percent (to the nearest tenth of a percent) of the state’s population resides in the largest county?
A. .3% B. 3.1% C. 31.8% D. 314.4%
Unit 4.3 Increase and decrease problems
18. You are about to buy a TV, priced at $650. You must pay 7.5% sales tax. What is the total amount you must pay, including sales tax?
A. $604.50 B. $702.70 C. $698.75 D. $601.25
19. A customer orders 60,000 car batteries. If experience has shown that 7% of the batteries produced will be defective, how many batteries must be produced to ensure production of 60,000 good ones?
A. 55,800 B. 64,200 C. 4,200 D. 64,517
20. What amount of wallpaper should you purchase if you need to cover 450 sq ft of wall area and 15% of the material purchased will be wasted?
A. 517.5 sq ft B. 382.5 sq ft C. 529.4 sq ft D. 3,000 sq ft
21. The population of a town increased from 11,677 last year to 13,817 this year. The population:
A. Increased 18.33% B. Decreased 18.33% C. Increased 15.49% D. Decreased 15.49%
22. If your gross pay is $2,200 per month and your take-home pay is $1,421, what percent (to the nearest tenth) of your gross pay is withheld for taxes, etc?
A. 64.6% B. 154.8% C. 35.4% D. 54.8%
Challenge problems
23. You are a real estate agent with ABC Real Estate Company. You help sell a home for $155,000. The total commission is 6.5%. Your company is to receive 60% of the total commission; you will receive 65% of that amount. What is your personal share of the commission?
A. $10,075 B. $3,929.25 C. $3,627 D. $3,357.55
24. You, as the owner of a small business, have a Keogh retirement plan. Your plan allows annual contributions up to 13% of net income (profit). You cannot remember what your net income was 5 years ago, but you know you made a maximum allowable contribution. If your contribution was $10,699, what must your net income have been?
A. $1,398.87 B. $12,089.87 C. $82,300 D. $78,482
25. The annual net income on a neighborhood shopping center is $587 ,000. Paula Cooper is interested in buying the property and wants to earn 8.25% on her investment. What price, rounded to the nearest thousand dollars, should she pay for the property?
A. $48,000 B. $4,843,000 C. $539,000 D. $7,115,000
CHAPTER 5
Unit 5.1 Trade discounts
1. Calculate the trade discount amount for a product with a list price of $440 and a trade discount rate of 30%.
A. $132 B. $572 C. $308 D. $440
2. Calculate the net price for a product with a list price of $14,700 and a 45% trade discount.
A. $21,315 B. $6,615 C. $14,700 D. $8,085
3. What is the complement of 40%?
A. 140% B. 1/40% C. 60% D. .025%
4. For a 30% trade discount rate, which statement is true?
A. You pay 30% of the list price B. You pay 70% of the list price
C. You pay 130% of the list price D. You pay 170% of the list price
5. Calculate the net price for a product having a list price of $14,500 and a 30/10/10 series discount.
A. $7,250 B. $8,221.50 C. $10,150 D. $9,135
6. A company offers a series discount of 30/15/5. Determine the equivalent single discount rate.
A. .225% B. 56.525% C. 43.475% D. 50%
Unit 5.2 Cash discounts
7. You buy goods with a list price of $500. You return goods that are defective, having a list price of $60. You are entitled to a trade discount of 30%. The seller paid $20 freight on your behalf and added the amount to the invoice. You are offered a 4% cash discount if you pay the invoice within 15 days. What is the net amount you should pay the supplier if you pay within the discount period?
A. $315.68 B. $309.12 C. $314.88 D. $298.40
8. You purchase goods on an invoice dated July 13 with terms of 3/20, n/45. What is the last day of the discount period?
A. August 1 B. August 2 C. August 26 D. August 27
9. You purchase goods with a net price of $300. The invoice is dated April 28 with terms of 2/15, n/30. What amount should you pay, if payment is made on May 12?
A. $300 B. $6 C. $291 D. $294
10. You buy goods with a net price of $350 on an invoice dated December 14. Terms are 4/10, 2/30, n/45. Calculate the net amount due if paid on January 13.
A. $350 B. $343 C. $339.50 D. $336
11. An invoice dated March 25 has terms of 2/10, n/30 ROG. You receive the goods on March 30. What is the last day of the discount period?
A. April 4 B. April 5 C. April 9 D. April 10
12. You buy goods on an invoice dated November 20. Terms are 2/10, n/30 EOM. Calculate the last day of the discount period.
A. November 30 B. December 10 C. December 20 D. January 10
13. You buy goods on an invoice dated July 26. Terms are 4/15, n/30 EOM. Calculate the last day of the discount period.
A. August 10 B. August 15 C. August 25 D. September 15
14. You purchase goods on an invoice dated February 15 of a leap year, with terms of 5/10-90X. What is the last day of the discount period.
A. May 15 B. May 26 C. May 25 D. May 27
15. You receive an invoice for $720 with terms of 6/10, n/45. The supplier allows a cash discount for partial payments and you pay $400 within the discount period. Calculate the amount you will still owe after the $400 payment.
A. $294.47 B. $296 C. $425.53 D. $424
16. For terms of 3/10, n/30, what annual rate do you pay the supplier if you fail to pay the invoice at the end of the discount period?
A. 37.24% B. 56.44% C. 54.75% D. 37.63%
Challenge problems
17. Cash discounts are given only if the invoice is paid within the discount period. (T or F)
18. You can buy a product from one of three companies: Company 1 for $3,000 with a 40% trade discount; Company 2 for $3,800 with a trade discount of 40/15/5; or Company 3 for $2,650 with a trade discount of 25/10. Which company has the lowest net price?
A. Company 1 B. Company 2
C. Company 3 D. All net prices are the same
19. You purchase goods with a list price of $642, a trade discount of 25%, and terms of 2/15, n/60. Find the net amount due, assuming the invoice is paid within the discount period.
A. $629.16 B. $481.50 C. $471.87 D. $468.66
20. You purchase goods with a list price of $1,500, a trade discount of 30/15/5, and terms of 6/15, n/30. What is the net amount due, assuming you pay the invoice 28 days after the invoice date?
A. $1,500 B. $847.88 C. $797 D. $750
CHAPTER 6
Unit 6.1 Markup
1. Given: Cost = $3,000; markup = $450. Selling price is $3,450. (T or F)
2. If you buy a product for $4.52 and sell it for $6.10, what is the dollar amount of markup?
A. $4.52 B. $1.58 C. $10.62 D. $6.10
3. June McDonald, an antiques dealer, has the chance to buy a 70-year-old rocking chair. June thinks she can sell the rocking chair for $320. If June wants to make $150 on the chair, what price should she pay for the chair?
A. $470 B. $170 C. $320 D. $150
4. Markup can be used for pricing services, as well as products. (T or F)
5. Assume you own an appliance store. Find the selling price for a refrigerator costing $722, based on a 22% markup on cost.
A. $563.16 B. $722 C. $880.84 D. $925.64
6. You, as a used car dealer, have the opportunity to buy a 3-year-old car. You think you can sell the car for $9,500. If you want to maintain a 21% markup on selling price, what price should you pay for the car?
A. $11,495 B. $7,505 C. $12,025.32 D. $1,995
7. Assume you own a sporting goods business. Find the selling price for a tent costing $387, based on a 25% markup on selling price.
A. $516 B. $290.25 C. $483.75 D. $387
8. A property management company furnishes skilled help to maintain apartment complexes. If it pays employees $16 per hour and wishes to maintain a 30% markup based on the employees’ hourly pay, what hourly rate should it bill property owners?
A. $22.86 B. $11.20 C. $12.30 D. $20.80
9. An automotive repair shop employs automotive technicians to work on customers’ cars. Suppose the prevailing billing rate for other repair shops is $40 per hour. If the repair shop decides to charge customers the prevailing rate, what hourly rate can the technicians be paid in order to maintain a 130% markup on employees’ pay?
A. $17.39 B. $12 C. $28 D. $30.77
Unit 6.2 Percent markup
10. Peggy Mason, an 11-year-old, has a worm business in which she buys night crawlers from younger kids for 4 cents each and sells them for $1.25 per dozen. What is the percent markup on cost (to the nearest tenth of a percent)?
A. 3,025% B. 160.4% C. 96.8% D. 61.6%
11. A home costs $148,500 to build and is sold for $168,000. What is the percent markup on selling price (to the nearest tenth of a percent)?
A. 11.6% B. 13.1% C. 8.6% D. 7.6%
12. A retailer uses a 30% markup on cost. What is the equivalent percent markup on selling price (to the nearest tenth of a percent)?
A. 70% B. 130% C. 23.1% D. 42.9%
13. A retailer uses a 60% markup on selling price. What is the equivalent percent markup on cost?
A. 37.5% B. 62.5% C. 150% D. 40%
Unit 6.3 Markdown
14. Merchandising companies often have markdowns on products for which there is low demand. (T or F)
15. A tire store advertises all tires at a 25% discount. Find the reduced price of a tire originally marked at $69.
A. $17.25 B. $51.75 C. $86.25 D. $55.20
16. A winter coat was priced originally at $170. Because the winter season was coming to a close, the price was reduced 20%. After three weeks, the price was reduced an additional 15%. After the price was reduced an additional 10%, the coat sold. What is the reduced price?
A. $104.04 B. $93.50 C. $115.60 D. $136.00
17. You, as the owner of a clothing store, reduce the price on a dress from $79 to $65. What is the percent markdown (to the nearest tenth of a percent)?
A. 82.3% B. 21.5% C. 17.7% D. 121.5%
Unit 6.4 Break-even analysis
18. Ezra buys a couch from a supplier at a list price of $720 with a 25% trade discount. Ezra needs 32% above cost to cover operating expenses. What is the break-even price?
A. $950.40 B. $712.80 C. $770.40 D. $540.00
19. A retailer buys a product at a cost of $80. The break-even price is $103. If the product is sold for $98, what is the result?
A. $18 profit B. $5 absolute loss C. $5 operating loss D. $18 operating loss
20. A retailer buys a product at a cost of $120. The break-even price is $155. If the product is sold for $110, what is the result?
A. $10 operating loss B. $10 absolute loss C. $45 operating loss D. $10 profit
21. Matilda makes kitchen cutting boards. Her fixed costs are $2,700 a month. Materials and labor for each cutting board cost $48. If Matilda sells the cutting boards for $73 each, how many must she sell each month to break even?
A. 108 B. 188 C. 37 D. 178
Challenge problems
1. A grocer bought 300 pounds of bananas at 75 cents per pound. Experience at this store indicates that, as a result of aging, 30% of the bananas are sold at 80% of cost and another 10% are discarded. At what price per pound must the top-quality bananas be sold so that the total proceeds will result in a 20% markup on selling price? Round up to the nearest penny.
A. $1.27 per pound B. $1.10 per pound C. $0.95 per pound D. $0.75 per pound
18. A produce manager determines that, to produce the desired markup on selling price, bananas bought at 90 cents per pound must be sold at $1.44 cents per pound. Find the price/cost ratio that could be used for future purchases.
A. .625 B. 27 C. 1.6 D. 0.6
19. A retailer purchased a winter coat for $150. The coat was originally priced at $245. Because the winter season was coming to a close, the price was reduced 20%. After the price was reduced another 20%, the coat sold. Based on the reduced price, what is the percent markup on cost (to the nearest tenth of a percent)?
A. 63.3% B. 23.2% C. 2.8% D. 4.5%
CHAPTER 7
Unit 7.1 Checking account balance
1. A debit memo increases your account balance. (T or F)
2. Your checking account earned monthly interest of $8.54. You will likely learn of this when you receive a credit memo from the bank. (T or F)
3. You prepared a deposit, indicating a total of $187. The bank determined that the correct amount of the deposit was $178. The bank will likely send you a debit memo informing you of the error. (T or F)
4. A customer's bank statement balance at the end of June was $1,422.91. During July, the bank received deposits totaling $8,472.33 and paid checks totaling $7,934.58. Assuming there were no other charges or credits, calculate the bank statement balance at the end of July.
A. $885.16 B. $537.75 C. $17,829.82 D. $1,960.66
5. A deposit taken to the bank on September 30 will, for sure, be credited to your account on September 30. (T or F)
6. A deposit taken to the bank on September 30 did not appear on the September bank statement. Where will the item appear on the September 30 bank reconciliation?
A. Added to the checkbook balance side B. Subtracted from the checkbook balance side
C. Added to the bank balance side D. Subtracted from the bank balance side
7. Interest earned on a checking account appeared on the September bank statement, but is not yet entered in the checkbook balance. Where will the item appear on the September 30 bank reconciliation?
A. Added to the checkbook balance side B. Subtracted from the checkbook balance side
C. Added to the bank balance side D. Subtracted from the bank balance side
8. Check 424 was recorded incorrectly as $137 in the checkbook register but appeared correctly on the September bank statement as $173. Where will the item appear on the September 30 bank reconciliation?
A. Added to the checkbook balance side B. Subtracted from the checkbook balance side
C. Added to the bank balance side D. Subtracted from the bank balance side
9. Check 474 was written on September 28 and was outstanding on September 30. Where will the item appear on the September 30 bank reconciliation?
A. Added to the checkbook balance side B. Subtracted from the checkbook balance side
C. Added to the bank balance side D. Subtracted from the bank balance side
10. A service charge appeared on your September bank statement. Where will the item appear on the September 30 bank reconciliation?
A. Added to the checkbook balance side B. Subtracted from the checkbook balance side
C. Added to the bank balance side D. Subtracted from the bank balance side
11. Check 457 was written on August 24 and was still outstanding on September 30. Where will the item appear on the September 30 bank reconciliation?
A. Added to the checkbook balance side B. Subtracted from the checkbook balance side
C. Added to the bank balance side D. Subtracted from the bank balance side
12. A debit memo, together with a customer's returned check, was mailed on September 29 by the bank but was not entered in your records. Where will the item appear on the September 30 bank reconciliation?
A. Added to the checkbook balance side B. Subtracted from the checkbook balance side
C. Added to the bank balance side D. Subtracted from the bank balance side
13. Find the December 31 reconciled balance based on the following: (a) your December 31 checkbook balance is $7,648.34; (b) the bank statement balance is $9,522.28; (c) your previous (November 30) bank reconciliation showed that check 1167 for $700 was outstanding; (d) the December 31 bank statement shows that check 1167 was paid in December; (e) all December checks were paid except check 1208 for $325, check 1209 for $32.18, and check 1211 for $975; (f) the bank statement shows a $500 deposit on December 13, which you forgot to record in your records; (g) the bank statement shows that the bank paid you interest of $41.76 for the month of December.
A. $7,190.10 B. $8,190.10 C. $8,690.10 D. $9,190.10
Challenge problems
14. Bessie Burton's checking account balance at the end of August is $812.33. During September, she made the following deposits: $450, $62, $982.34, and $85.52. She wrote checks as follows: $425, $38.44, $86.50, $525, $12.80, and $92.75. Bessie's checkbook balance is $412.96 at the end of September. (T or F)
15. Find the August 31 reconciled balance based on the following: (a) your August 31 checkbook balance is $2,317.72; (b) the bank statement balance is $1,298.04; (c) your previous (July 31) bank reconciliation showed two outstanding checks: 861 for $350 and 863 for $52; (d) the August 31 bank statement indicates that check 861 was paid by the bank during August; (e) all August checks were paid except check 903 for $167; (f) a $450 debit appears on the bank statement because the bank automatically withdrew that amount to make your semiannual life insurance payment, but you did not enter the $450 item in your checkbook; (g) the bank statement shows that the bank paid you interest of $11.32 for the month of August; (h) the bank statement does not show your August 31 deposit of $800.
A. $2,329.04 B. $1,931.04 C. $1,879.04 D. $1,867.72
16. A bank reconciliation shows the following items on the Checkbook Balance side: February interest of $8.11 is added to the balance; $45 check printing charges are subtracted from the balance. The following items are on the Bank Statement side: the February 28 deposit for $250 is outstanding and is added to the balance; check 1018 for $200 is outstanding and is subtracted from the balance. After completing the bank reconciliation, which items need to be entered in the checking account records?
A. Add February interest of $8.11 and deduct $45 check printing charges.
B. Deduct February interest of $8.11 and add $45 check printing charges.
C. Add the $250 outstanding deposit and deduct the $200 outstanding check.
D. No adjustments are necessary.
CHAPTER 8
Unit 8.1 Gross pay: Wages and incentive plans
1. Some employees are exempt from the Fair Labor Standards Act. (T or F)
2. Employers cannot provide overtime pay that is superior to what the Fair Labor Standards act requires. (T or F)
3. Dave Frisby is paid time and a half after 40 hours per week. His regular hourly rate is $9 per hour. Compute his gross pay for a week in which he worked 47 hours.
A. $423 B. $634.50 C. $454.50 D. $486
4. You and three classmates work for different companies. Your gross pay is $1,395 a month. Betty earns $685 semimonthly, Brad earns $320 a week, and Meg earns $645 biweekly. Who has the greatest gross pay?
A. You B. Betty C. Brad D. Meg
5. Ted sews sleeping bags. He is paid $8.50 per hour plus $1.25 per sleeping bag. During the week, Ted worked 40 hours and sewed 42 sleeping bags. What is Ted’s gross pay for the week?
A. $340 B. $392.50 C. $390 D. $409.50
6. Grover Hayes assembles chairs. He is paid $1.75 per chair for the first 100, $2.00 per chair for the next 100, and $2.25 per chair thereafter. During the week, Grover assembled 362 chairs. What is his gross pay?
A. $739.50 B. $814.50 C. $1,189.50 D. $782.50
7. Sarah Marx is a salesperson in a furniture store and receives a $1,400 semimonthly draw. She is paid a 4% commission on net sales. During November, Sarah sold $110,300 of merchandise; her share of sales returns were $3,100. Calculate Sarah’s final commission payment for November.
A. $4,288 B. $4,412.00 C. $2,888 D. $1,488
8. Ruby Nichols is a salesperson for Bright Light Fixtures. She is paid a semimonthly salary of $900 plus 1.5% of monthly net sales over $80,000. Ruby’s sales during October were $134,200. Her share of returns were $3,800. What is Ruby’s gross pay for October?
A. $1,656 B. $2,556 C. $3,756 D. $1,800
Unit 8.2 Payroll deductions for employees
9. During 2018, Rodrigo earned $220,000 and his wife Sofi earned $58,000. Which statement is true?
A. Rodrigo’s employer must withhold Additional Medicare tax of $1,980.
B. Assuming they file jointly, their actual Additional Medicare tax is $252.
C. Assuming they file jointly, their actual Additional Medicare tax is $702.
10. The number of exemptions claimed on a federal income tax return does not have to match the number of allowances claimed on Form W-4. (T or F)
11. Melvin Jenkins works for Dimond Landscape Company. His weekly gross pay during 2018 is $760. Melvin is single and claims 1 withholding allowance. Determine the amount Dimond should deduct for federal income tax, using the percentage method.
A. $59.97 B. $98.50 C. $80.70 D. $69.44
12. Which statement is true?
A. Social Security consists of (1) FICA, (2) Medicare, and (3) Additional Medicare tax.
B. The number of allowances claimed on Form W-4 must match the number of exemptions claimed on the federal income tax return.
C. FICA consists of (1) Social Security, (2) Medicare, and (3) Additional Medicare tax.
D. FICA tax and federal income tax are the same thing.
13. Waldo Metz has gross pay of $2,800 for week 49. Prior year-to-date earnings is $127,500. Using 2018 FICA tax rates shown in Unit 8.2, what is the combined Social Security and Medicare tax that should be withheld from Waldo’s pay?
A. $96.40 B. $191.25 C. $141.05 D. $93.00
Unit 8.3 Employer taxes and settling up with the IRS
14. Employers withhold FICA tax from employees’ pay. Employers must pay FICA tax of their own. (T or F)
15. Employees pay federal unemployment tax (FUT). (T or F)
20. Vance North works for Howell Window Cleaning Company. His weekly gross pay is $800. His prior year-to-date earnings are $6,400. Using 2018 tax rates, figure how much FUT Howell should pay.
A. $6.40 B. $3.60 C. $56 D. $57.60
16. Individuals who do not pay a sufficient amount of federal income tax on a pay-as-you-go basis might be charged an underpayment penalty when they file their income tax return. (T or F)
17. Natasha is a self-employed artist. Her 2018 net income is $110,200. Calculate Natasha’s self-employment FICA tax, to the nearest dollar.
A. $7,922 B. $15,844 C. $16,861 D. $15,571
18. Domonic is a self-employed writer. He owes federal income tax of $8,235 plus an additional $4,122 self-employment FICA tax. He has made 4 estimated tax payments of $3,000 each. How much does Dominic owe or get back from the IRS?
A. owes $12,357 B. owes $357 C. $357 refund D. $12,000 refund
Challenge problems
19. Monte Orvis assembles chairs. He is paid $9 per hour plus $3.25 per chair. During the week, he worked 40 hours and assembled 53 chairs. Determine Monte’s average hourly pay for the week?
A. $12.25 per hour B. $532.25 per hour C. $13.31 per hour D. $12.92 per hour
20. Mandy Sevy earns $2,700 semimonthly. Her prior year-to-date earnings are $15,840. She is married and claims 3 withholding allowances. Figure the amount of her paycheck after deducting Social Security tax, Medicare tax, federal income tax using the percentage method, state income tax (figured as 6% of gross pay), and a $75 amount withheld for a savings plan.
A. $2,018.61 B. $2,074.42 C. $285.16 D. $206.55
21. Luis and Maria Delacruz filed their 2018 income tax return in April, 2019. They listed their wages and exemptions and deductions they were entitled to. Their federal income tax liability was $4,876. Luis’ W-2 form indicated his employer withheld $1,740 Social Security tax, $452 Medicare tax, $3,120 federal income tax, and $1,188 state income tax. Maria’s W-2 form indicated her employer withheld $1,503 Social Security tax, $352 Medicare tax, $2,418 federal income tax, and $844 state income tax. Calculate their federal tax refund or balance due.
A. $6,741 balance due B. $6,741 refund C. $662 balance due D. $662 refund
CHAPTER 9
Unit 9.1 Computing simple interest and maturity value
1. Rowley Mott borrowed $8,000 for 2 years at 8% simple interest. What is the maturity value?
A. $8,000 B. $8,640 C. $640 D. $9,280
2. Suppose you borrow $12,000 for 15 months at 7.5% simple interest. What is the maturity value?
A. $12,900 B. $13,125 C. $1,125 D. $25,500
3. In the simple interest formula I = PRT, I stands for the dollar amount of interest. (T or F)
4. In the simple interest formula I = PRT, T stands for time, in years. (T or F)
5. Calculate the number of days between March 22 and November 18 (of the same year).
A. 241 days B. 240 days C. 239 days D. 242 days
6. Calculate the number of days between November 28 and February 12 of the following year.
A. 78 days B. 77 days C. 76 days D. 75 days
7. Calculate the number of days between December 3, 2019 and March 28, 2020 (a leap year).
A. 117 days B. 116 days C. 115 days D. 114 days
8. You get a 60-day loan on May 12. What is the maturity date?
A. July 12 B. July 13 C. July 10 D. July 11
9. You get a 180-day loan on August 1, 2019. What is the maturity date?
A. January 28, 2020 B. February 1, 2020 C. January 29, 2020 D. January 30, 2020
10. You get a 120-day loan on January 12 of a leap year. What is the maturity date?
A. May 12 B. May 13 C. May 11 D. May 14
11. You get a 12% 90-day $5,000 loan. Calculate interest, assuming the lender uses a 360-day year.
A. $147.95 B. $150.00 C. $5,147.95 D. $5,150
12. You get a 10% 180-day $2,000 loan. Calculate interest, assuming the lender uses a 365-day year.
A. $98.63 B. $100 C. $2,098.63 D. $2,100
13. The Truth in Lending Act does not allow lenders to charge interest over 36% per year. (T or F)
14. Some loans are exempt from the Truth in Lending Act. (T or F)
15. In calculating an APR for Truth in Lending purposes, lenders use a 360-day year. (T or F)
16. You get a $3,000 loan at 9% interest for 120 days. The lender uses a 365-day year. How much will you owe on the maturity date?
A. $88.77 B. $90.11 C. $3,088.77 D. $3,090.11
17. You get a $5,000 180-day 11% consumer loan on May 18. You make a $2,000 payment on July 18. Calculate the balance you still owe after the payment.
A. $3,000 B. $3,271.23 C. $2,908.08 D. $3,091.92
18. About 2 months ago, you got a $2,000 180-day 13% consumer loan. Today you made a $1,000 payment, resulting in a balance of $1,042.74. Thirty-eight days later you pay the loan in full. Calculate the total amount of that payment.
A. $1,042.74 B. $1,178.30 C. $1,056.85 D. $1,028.63
Unit 9.2 Solving for principal, rate, and time
19. You open a checking account. You are paid 3% interest on the average daily balance, but are charged a $4 monthly charge. Assuming that interest is paid monthly (regardless of the number of days in the month), calculate the average balance you must maintain to offset the $4 monthly charge.
A. $1,200 B. $1,500 C. $1,600 D. $2,100
20. A supplier charges 15% interest on past-due accounts. Interest on a $512 account is $10.52. For how many days must the account have been overdue, assuming the supplier uses a 365-day year?
A. 48 days B. 50 days C. 52 days D. 54 days
21. You borrow $350 from your aunt and agree to repay her $400 ($350 principal + $50 interest) in 18 months. What interest rate (using simple interest, and to the nearest tenth) are you paying?
A. 14.3% B. 12.5% C. 9.5% D. 11.2%
22. You get a 180-day $3,000 consumer loan at 9% interest. You are required to pay a $100 setup fee at the time you get the loan. Based on a 365-day year, calculate the APR. Express the rate to the nearest tenth of a percent.
A. 16.3% B. 9.0% C. 9.3% D. 15.8%
23. A lender makes a $4,000 90-day consumer loan. Interest of 10% is charged using a 360-day year. What is the APR? Express the rate to the nearest tenth of a percent.
A. 10.0% B. 10.1% C. 10.8% D. 11.4%
24. You get a payday loan. The lender charges you $9 per week for each $100 you borrow. Assuming you borrow $300 for 2 weeks, what APR will you be paying?
A. 4.69% B. 469.29% C. 9.00% D. 234.64%
Unit 9.3 Compound interest
25. Calculate the periodic rate for 9% compounded semiannually.
A. 18% B. 9% C. 4.5% D. .0045%
26. Calculate the periodic rate for 4.5% compounded monthly.
A. 0.38% B. 0.375% C. 3.8% D. 3.75%
27. Janae deposits $800 in a savings account. The money is left on deposit for 3 years earning 4% compounded annually. Calculate the balance at the end of 3 years.
A. $96 B. $896 C. $899.89 D. $901.41
28. Myrna deposits $1,000 in a savings account. The money is left on deposit for 2 years earning 4% compounded semiannually. Calculate the account balance at the end of 2 years. Do not round intermediate results.
A. $1,081.60 B. $1,080 C. $1,097.63 D. $1,082.43
29. What is the APY for 6.45% compounded quarterly?
A. 25.80% B. 6.61% C. 1.6125% D. 6.56%
Challenge problems
30. Darla Sevy purchased merchandise from a supplier and failed to pay the invoice amount ($310) by the last day of the credit period (August 12). Calculate the total amount Darla must pay on October 15 if the supplier charges 18% interest on past-due accounts.
A. $9.78 B. $64 C. $319.78 D. $374
31. Heidi Muir, a sporting goods wholesaler, purchased goods from a supplier for $3,400. The supplier offers a 3% discount if the invoice is paid within 10 days; if not paid within 10 days, the full amount must be paid within 30 days of the invoice date. Use the formula [pic] to find the annual rate Heidi, in effect, is paying the supplier if she fails to pay the invoice at the end of the discount period.
A. 56.44% B. 97% C. 54.75% D. 92.48%
32. You fail to pay your annual property taxes on the November 30 deadline. The tax was $1,482.65. You are charged a one-time 8% penalty plus 12% simple interest on the amount of the unpaid tax (exclusive of the one-time 8% penalty). Calculate your APR, assuming you pay on the following February 23. Use a 365-day year and express the rate to the nearest tenth of a percent.
A. 41.8% B. 46.4% C. 12.0% D. 20.0%
CHAPTER 10
Unit 10.1 Time-value-of-money terminology
1. Assume you deposit $150 today in a savings account. You earn 5% compounded quarterly and leave the money on deposit for 4 years. What is the n-value?
A. 1.25 B. 4 C. 16 D. 5
2. Assume you deposit $400 today in a savings account. You earn 5% compounded semiannually and leave the money on deposit for 3 years. What is i?
A. 5% B. 10% C. 6 D. 2.5%
3. Assume you bought some corporate stock 7 years ago for $1,300 and sold the stock today for $1,575. What is the present value?
A. $1,300 B. 7 C. $1,575 D. $275
4. Assume you bought some vacant land 8 years ago for $65,000 and sold it today for $72,000. What is the future value?
A. $65,000 B. $72,000 C. 8 D. $7,000
5. Assume you purchased some corporate stock 5 years ago for $3,000. You received dividends of $50 each quarter, for a total of $1,000. You just sold the stock today for $7,250. What is the PMT value?
A. $50 B. $1,000 C. $3,000 D. $8,250
Unit 10.2 Future value
6. 170 years ago, your great-great-great-great grandfather lost $12 playing poker at a fur-trading post in Wyoming. If he had not been tempted to get into the poker game and instead had deposited the $12 in a savings account earning 3% compounded annually, how much money would be in the account today?
A. $61.20 B. $73.20 C. $1,826.04 D. $1,814.04
7. Ty Lu is 25 years old and deposits $2,000 at the end of each year into an individual retirement account (IRA). If the account earns 7% compounded annually, how much will Ty have when he retires 40 years later?
A. $399,270.22 B. $126,498.08 C. $10,854.87 D. $29,948.92
8. Preston Luck spends $175 a month on cigarettes and is considering kicking the habit. If Preston just turned 21 and deposits the $175 at the end of each month into a savings plan earning 5.25% compounded monthly, how much will he have in his savings plan at age 70?
A. $1,740,385.41 B. $481,009.60 C. $1,748,362.17 D. $102,900
9. Jodi Natt, who just turned 18, spends $130 a month on soda pop. If Jodi quits drinking soda pop and deposits the $130 at the beginning of each month into a savings plan, earning 7.5% compounded monthly, what amount will she have at age 60?
A. $459,855.15 B. $456,998.91 C. $462,729.24 D. $494,344.29
10. The average growth rate for a certain corporate stock over the last 100 years is 12%. If your great-great-grandmother had invested $300 in the stock 100 years ago and received the 12% return, what would her investment be worth today?
A. $25,056,679.72 B. $3,600 C. $3,900 D. $25,056,979.72
11. Tuition at your local university is currently $7,550 per year. You want your newborn daughter to attend when she turns 18. If tuition rates are expected to increase at an annual rate of 3.5%, what will the annual tuition be at the college 18 years from now?
A. $7,814.25 B. $12,306.50 C. $13,822.91 D. $14,024.04
12. Suppose there are an estimated 3,700 elephants in a certain region. If the elephant population is decreasing 4% per year, what will the estimated elephant population be 10 years from now?
A. 148 elephants B. 3,552 elephants C. 2,459 elephants D. 5,476 elephants
Unit 10.3 Present value
13. Yasmin’s grandfather gives all of his grandchildren $5,000 on their 30th birthdays. Yasmin just turned 20. What is the value of the $5,000 gift, in today’s dollars, assuming that Yasmin can earn 9% compounded annually?
A. $32,088.29 B. $11,836.82 C. $2,887.95 D. $2,112.05
14. Cicily Montague, an author from Paris, sells the movie rights to her book and will receive 720,000 euros at the end of each quarter for the next 4 years. Assuming that money is worth 6% compounded quarterly, what is the value of the movie rights?
A. 10,174,510.11 euros B. 10,327,127.76 euros
C. 2,644,568.60 euros D. 2,494,876,04 euros
15. Assume you own a manufacturing business and are thinking about purchasing a labor-saving device. The device will last 15 years and save you $2,300 per month in labor costs (assume that the savings are realized at the end of each month). Assuming that you need to earn 9% compounded monthly on your money, what is the value of the device?
A. $226,764.84 B. $870,333.27 C. $414,000 D. $107,867.47
16. You have the chance to buy a promissory note in which you will receive 113 monthly payments of $850, starting a month from now. If you want to earn 6% compounded monthly, what price should you pay for the note?
A. $14,147.09 B. $73,242.66 C. $96,050 D. $54,667.90
17. Seven years ago you bought a 20-year 6% $1,000 bond. The bond pays interest each 6 months. You want to sell the bond. You just received the 14th semiannual interest payment of $30 ($1,000 ( 3% periodic rate = $30). Similar bonds are being issued that pay 7.75% semiannually. What is your bond worth today?
A. $1,000 B. $879.76 C. $1,440.36 D. $858.23
18. Suppose you own a 6.75% $5,000 bond. Similar bonds are being issued that pay 5.5%. Which statement is true?
A. Your bond is worth $5,000 B. Your bond is worth less than $5,000
C. Your bond is worth more than $5,000 D. Your bond is worth $1,000
19. Some bonds, referred to as zero-coupon bonds, pay no periodic interest; instead the bondholder buys the bond at a discount and receives the maturity value on the maturity date. In effect, interest is received in one lump-sum when the bond matures. Suppose a corporation issues 20-year $1,000 zero coupon bonds. Calculate the price you must pay for one of these bonds based on a prevailing 7% annual rate.
A. $1,000 B. $1,070 C. $258.42 D. $930
Challenge problems
20. Suppose you invest $5,500 today and $100 each 6 months (starting in 6 months) in a savings plan earning 5.5% compounded semiannually. What will your balance be at the end of 5 years?
A. $6,800 B. $8,347.36 C. $14,124.45 D. $14,087.22
21. You leased retail space 5 years ago for $18,000 per month, payable at the beginning of each month. Your lease is for 15 years and allows you to sublease the space. You have outgrown the space and sublease to Edgey Furniture Company for the remaining 10 years. Edgey will pay you $24,000 at the beginning of each month. What is the value of your position in the lease (referred to as a leasehold interest), assuming that money is worth 9% compounded monthly?
A. $470,124.23 B. $1,169,793.80 C. $477,202.54 D. $473,650.16
22. Alicia Navarrett, a 30-year-old real estate broker, decides to start a retirement plan. She figures that her income for the next 25 years will be sufficient to deposit $500 at the end of each quarter into her retirement plan earning 6% compounded quarterly. After 25 years she will let the money sit for another 10 years, without making additional deposits, until she is 65 years old. What amount will Alicia have when she turns 65?
A. $114,401.52 B. $207,526.46 C. $118,582.33 D. $210,911.86
23. Your Aunt Florence decides to sell her office supply business. Ishiro Suma offers to buy the business for $480,000 cash. Michael Gabriel offers to buy the business by paying $12,000 at the end of each quarter for 10 years, followed by $18,000 at the end of each quarter for 5 years. Because Aunt Florence will receive a total of $840,000 from Michael, she is tempted to go with Michael’s offer. You suggest figuring the present value of Michael’s offer. Help her find the present value, assuming she can earn 8% compounded quarterly on her money.
A. $328,265.75 B. $622,591.55 C. $840,000 D. $461,563.08
24. Assume you deposit some money in a savings account, earning 4.75% compounded semiannually. What is the i-value, in decimal form, when using compound interest formulas?
A. .0475 B. 2.375 C. .02375 D. 4.75
25. Preston Luck spends $175 a month on cigarettes and is considering kicking the habit. Preston just turned 21 and would deposit the $175 at the end of each month into a savings plan earning 5.25% compounded monthly. In order to determine how much he will have in his savings plan at age 70, which formula should we use?
A. Formula 1A B. Formula 1B C. Formula 2A D. Formula 2B
26. Suppose you invest $5,500 today and $100 each 6 months (starting in 6 months) in a savings plan earning 5.5% compounded semiannually. In order to determine your balance at the end of 5 years, which formula(s) should we use?
A. Formula 1A B. Formula 1B
C. Both 1A and 1B D. Use another formula
27. Assume you own a manufacturing business and are thinking about purchasing a labor-saving device. The device will last 12 years and save you $2,400 per month in labor costs (assume that the savings are realized at the end of each month). You can earn 8.75% compounded monthly on your money. Which formula should you use to determine the value of the device?
A. Formula 1B B. Formula 2B C. Formula 1A D. Formula 2A
28. Find the value of: $10 (1 + .025)3
A. $1,076.89 B. $10.00 C. $1.08 D. $10.77
29. Find the value of:
A. $214.57 B. $25 C. $8,950 D. $8.58
30. Find the value of:
A. $0.06 B. $15.42 C. $0.02 D. $50
CHAPTER 11
Unit 11.1 Sinking Funds
1. Uncle Ted promises to give his niece Beth $20,000 on her 30th birthday, 6 1/2 years from now. Uncle Ted can earn 8% compounded quarterly. What amount could Uncle Ted deposit today in a savings plan so that the plan would have the required $20,000 in 6 1/2 years?
A. $11,951.59 B. $593.98 C. $33,468.36 D. $9,600
2. While your dentist is filling a cavity in one of your teeth, he is talking with his dental assistant bout the new dental equipment he wants to buy in 3 years for $30,000. He wonders how much money he must deposit at the end of each quarter to accumulate $30,000. You get his attention and tell him if he will quit drilling for a minute you will help him calculate the amount. What amount is required if he can earn 6% compounded quarterly?
A. $28,200 B. $9,423.29 C. $2,300.40 D. $25,092.62
3. A British auto manufacturer issues £63,700,000 of 7% 20-year bonds. Terms of the bond require annual interest payments to bondholders plus deposits at the end of each year to a sinking fund for retirement of the bonds when they mature. Assuming the corporation can earn 6.5% compounded annually on its sinking fund, what is the total amount the corporation needs each year to pay interest to bondholders plus make the sinking fund deposit?
A. £4,459,000 B. £4,140,500 C. £1,640,682.38 D. £6,099,682.38
4. Anastasia just turned 24 and can save $175 per month, starting in 1 month. If Anastasia can earn 7.5% compounded monthly, what age will she be when she accumulates $1,000,000?
A. 578 years old B. 48 years old C. 72 years old D. 602 years old
Unit 11.2 Annuities
5. Assume you receive an inheritance of $450,000 and deposit it in a savings plan earning 6% compounded monthly. If you want to live off the interest without withdrawing any of the $450,000 principal, what amount can you withdraw each month?
A. $2,250 B. $27,000 C. $2,500 D. $30,000
6. Assume you win $2,500,000 in the lottery. After taxes you are left with $1,540,000. If you deposit the $1,540,000 in a savings plan earning 7.5% compounded monthly, how much can you withdraw at the end of each month if you want the plan to last 45 years?
A. $9,625 B. $2,894.32 C. $9,969.75 D. $2,851.85
7. Eva Rivera receives a $724,000 settlement from an auto accident. She deposits the money in a savings plan earning 6% compounded monthly. Eva wants the plan to last 25 years. How much can she withdraw each month if the withdrawals are made at the beginning of each month?
A. $4,664.74 B. $4,688.07 C. $4,641.53 D. $4,622.19
Unit 11.3 Loan payments
8. You are thinking about buying a sports car, priced at $28,500. Your bank will loan you $27,500 at 4.9% for 6 years. Determine your monthly payment.
A. $112.29 B. $381.94 C. $494.24 D. $441.61
9. If you purchase a big screen TV for $900 and the store finances the entire amount over 24 months at a monthly rate of 1.75%, what is your monthly payment?
A. $46.25 B. $38.19 C. $37.50 D. $42.18
10. Calculate the monthly payment for a 30-year $165,000 mortgage loan at 7.5% interest.
A. $13,970.75 B. $1,164.23 C. $1,153.70 D. $458.33
11. You are thinking about getting a 40-year $220,000 mortgage loan at 8.25% interest. Find the total amount of interest over the 40 years.
A. $1,571.11 B. $754,132.80 C. $974,132.80 D. $534,132.80
12. Several years ago you got a mortgage loan at 6.75% interest. You currently owe $148,248.46 with a monthly payment of $1,120.65. How long until the loan will be paid off?
A. 243 months B. 91 months C. 122 months D. 191 months
Unit 11.4 Solving for rate (i)
13. Shawna Kirby bought some land 23 years ago for $41,500. She just sold the land for $314,000. At what average annual rate did the land increase in value?
A. 7.57% B. 756.63% C. 656.63% D. 9.20%
14. One way of measuring inflation is through the consumer price index (CPI), which tracks the cost of a “basket of goods” (food, housing, medical care, fuel, etc.). The base year of the current index is 1983, when the basket of goods cost $100. The CPI was 9.9 in 1913 (meaning the same basket of goods cost $9.90), and 252.0 in 2018. Calculate the average annual rate of inflation from 1913 to 2018.
A. 205.90% B. 21.73% C. 20.73% D. 3.13%
15. Your annual salary 12 years ago was $17,600; it is now $24,500. If the inflation rate over the last 12 years has averaged 3.5% per year, has your salary kept up with inflation?
A. Yes B. No C. Need more information
16. You bought some corporate stock 12 years ago for $1,300. You received dividends of $50 at the end of each year. Immediately after receiving the final dividend check, you sold the stock for $3,450. What is your rate of return?
A. 9.44% B. 7.99% C. 13.17% D. 11.09%
Challenge problems
17. Assume that you win $1,000,000 in the lottery. After taxes you are left with $650,000. You deposit the $650,000 in a savings plan that earns 5.25% compounded monthly. Which statement is true?
A. If you withdraw $2,750 at the end of each month, the balance will stay at $650,000.
B. If you withdraw $2,975 at the end of each month, the balance will increase.
C. If you withdraw $2,800 at the end of each month, the balance will decrease.
D. If you withdraw $2,825 at the end of each month, the balance will increase.
18. Assume you want to buy a home in 2 1/2 years and will need a down payment of $10,000. You have $2,500 to deposit today in a savings plan that earns 6% compounded quarterly. What additional deposit can you make at the end of each quarter to accumulate the $10,000?
A. $1,875 B. $219.84 C. $663.26 D. $750
19. If gasoline prices increased over a 35-year period from 35.9 cents per gallon to $4.599 per gallon, what is the average annual rate of increase?
A. 5.70% B. 4.24% C. 7.56% D. 36.60%
20. Jade Stover is 25 years old. Some of Jade’s older relatives have retired, having no income other than Social Security. Jade does not want to be caught in that situation, so she is thinking about setting up a retirement plan. Jade wants to retire at age 60, 35 years from now, and wants her retirement plan to provide $2,000 a month for 30 years (until she is 90). Her plan can earn 5.25% compounded monthly. What amount must Jade deposit at the end of each month for the next 35 years so that she can then start receiving $2,000 at the end of each month for the following 30 years?
A. $1,584.56 B. $301.49 C. $1,592.47 D. $318.47
21. You deposit $100 at the end of each quarter into a savings plan earning 4% compounded quarterly. How much interest does the plan earn over 40 years?
A. $39,138.26 B. $16,000 C. $55,138.26 D. $23,138.26
22. In 8 years, Holly Tucker’s daughter will be entering college and Holly would like to help financially. Tuition is currently $4,500 a year, but is expected to increase at a rate of 4%, compounded annually. Holly decides to create a college fund and make 8 annual deposits, starting in one year. In 8 years, she would like her daughter to be able to make 4 annual withdrawals from the fund (at the beginning of each year) that will cover the annual tuition. If the college fund earns 6% compounded annually, how much must Holly deposit at the end of each year? Note: Assume that tuition will remain the same for the 4 years of college.
A. $2,285.48 B. $3,109.74 C. $2,194.73 D. $3,028.44
23. Several years ago you got a mortgage loan at 6.25% interest. You currently owe $132,844.37 with a monthly payment of $1,058.22. Which formula will you use to determine how many months left on the loan?
A. Formula 3 B. Formula 5 C. Formula 4A D. Formula 4B
24. Find the value of: [pic]
A. $0.88 B. $1,500 C. $1,710.57 D. $1,244.88
25. Find the value of: [pic]
A. 46.83 B. .02 C. 52.77 D. 24.07
CHAPTER 12
Unit 12.1 Time-value-of-money terminology
1. You deposit $1,275 today in a savings account. You earn 3.75% compounded monthly. You deposit an additional $350 at the end of each month. At the end of 4 years, you withdraw the balance of $19,576. What is the n-value?
A. 4 B. 16 C. 3.85 D. 48
2. You deposit $1,275 today in a savings account. You earn 3.75% compounded monthly. You deposit an additional $350 at the end of each month. At the end of 4 years, you withdraw the balance of $19,576. What is the present value?
A. $350 B. $19,618.19 C. $1,275 D. $1,625
3. You deposit $1,275 today in a savings account. You earn 3.75% compounded monthly. You deposit an additional $350 at the end of each month. At the end of 4 years, you withdraw the balance of $19,576. What is the periodic rate?
A. .3125% B. .31% C. 3.75% D. 45.0%
4. You borrow $450 from a friend and repay your friend $50 at the end of each month for 10 months. What is the payment (PMT)?
A. $450 B. $500 C. None D. $50
5. You borrow $450 from a friend and repay your friend $50 at the end of each month for 10 months. What is the future value?
A. $450 B. $500 C. None D. $50
Unit 12.2 Financial calculators
6. Which value is always entered in the “n” key?
A. The number of years B. The number of months
C. The number of quarters D. The total number of “periods”
7. You invest an amount of money or make a deposit to your bank account. This amount would be entered in the calculator as a negative value. (T or F)
8. Once we set our “periods per year” register at 1, we always enter the “annual” rate in the i-register. (T or F)
9. Values can be entered in the TVM registers in any order. (T or F)
10. If you make a total of five $100 payments, you should enter $500 in the PMT register. (T or F)
11. We can review the values in the TVM registers by pressing [RCL] [ N ], etc. (T or F)
12. Suppose you are starting a new problem using your TVM registers; 3 of the 5 variables are known. To insure that there is no unwanted data in the unused register, you can either (1) clear all registers before starting, or (2) input 3 known values and enter 0 in the unused register. (T or F)
Unit 12.3 Future value
13. Sylvia Lopez is 24 and deposits $3,500 at the end of each year into an individual retirement account (IRA). If the account earns 7.75% compounded annually, how much will Sylvia have when she retires 42 years later?
A. $993,065.07 B. $170,410.88 C. $147,000 D. $80,462.54
14. Cassidy Hemlock spends $80 a month on doughnuts and coffee and is considering the advantages of quitting that habit. If Cassidy just turned 22 and deposits the $80 at the end of each month into a savings plan earning 5.85% compounded monthly, how much will she have in her savings plan at age 75, after her final deposit?
A. $346,994.26 B. $345,310.87 C. $50,880 D. $310,643.10
15. Cassidy Hemlock spends $80 a month on doughnuts and coffee and is considering the advantages of quitting that habit. If Cassidy just turned 22 and deposits the $80 at the beginning of each month into a savings plan earning 5.85% compounded monthly, how much will she have in her savings plan at age 75, after her final deposit?
A. $346,994.26 B. $345,310.87 C. $50,880 D. $310,643.10
16. Sage Monet is going to deposit $625 into a savings plan. She will then deposit an additional $475 each quarter (starting in 3 months) for 30 years. If Sage can earn 4.685% compounded quarterly, what will her balance be in 30 years?
A. $19,335.90 B. $2,608,635.81 C. $127,439.29 D. $125,993.20
17. 135 years ago, your great-great grandmother lost $75 playing bingo in Oley, Pennsylvania. If she had not been tempted to gamble on bingo, but instead had deposited the $75 in a savings account earning 2.45% compounded annually, how much would be in the account now?
A. $1,645.66 B. $77,293.27 C. $1,968.69 D. $77.52
18. Calculate the account balance for $1,000 left on deposit for 210 days earning 4.9% compounded daily. Assume there are 365 days per year.
A. $1,026.95 B. $1,083.59 C. $1,028.59 D. $23,059.63
19. Fred Gridlock just turned 30 and can set aside $750 in a savings plan at the end of each 6 months. If Fred can earn 8.5% compounded semiannually, how much will he have when he turns 66?
A. $335,657.24 B. $349,922.67 C. $3,128,674.68 D. $61,313.57
20. The average growth rate for a certain stock over the last 70 years is reported to be 10% compounded annually. If your grandfather had invested $800 in the stock 70 years ago and received the 10% return, what would his investment be worth today?
A. $611,727.57 B. $56,000 C. $6,309,975.65 D. $631,797.57
21. Suppose your monthly electricity bill is $192.55. If rates are expected to increase at an annual rate of 8.75%, what will your bill be in 3 years?
A. $247.65 B. $250.11 C. $50.54 D. $243.09
22. Suppose there are an estimated 5,400 wild boar in a certain area. If the wild boar population is decreasing 2.45% per year, what will the wild boar population be in 15 years?
A. 4,770 B. 3,722 C. 7,763 D. 327
Unit 12.4 Present value
23. Ernesto’s rich godfather promises to give him $65,000 on his 28th birthday, 16 years from now. If money is worth 6.75% compounded annually, what is today’s value of his promise?
A. $22,857.42 B. $10,437.89 C. $184,841.50 D. $22,587.42
24. You win the lottery and will collect $10,000 at the end of each year for the next 25 years. Assuming that money is worth 8.55% compounded annually, what is the value of your prize, in today’s dollars?
A. $110,631.63 B. $792,492.51 C. $250,000 D. $101,917.67
25. You own a manufacturing business and are thinking about purchasing a labor-saving device at a cost of $225,000. The device will last 20 years and save you $1,800 per month in labor costs. You need to earn 9% compounded monthly on your money. What should you do, and why?
A. Buy the device because it is worth more than the $225,000 cost.
B. Buy the device because you will save a total of $$432,000, and the device costs only $225,000.
C. Not buy the device because it is worth less than the $225,000 cost.
26. Manuel wins a $4,000,000 sweepstakes prize. He is given the option of receiving $200,000 at the beginning of each year for 20 years (totaling $4,000,000) or receiving a one-time payment today of $2,400,000. Assuming that Manuel can earn 6.5% compounded annually on his money, what is the real value of the annual payments?
A. $4,000,000 B. $2,203,701.45 C. $7,765,061.73 D. $2,346,942.04
27. Five years ago you bought a 20-year 7.95% $1,000 bond. The bond pays interest each 6 months. You want to sell the bond. You just received the 10th semiannual interest payment of $39.75. Similar bonds are being issued that pay 8.15% semiannually. What is your bond worth today?
A. $986.50 B. $1,000 C. $982.86 D. $1,689.45
Challenge problems
28. Stephen Downs was severely injured in a motorcycle accident and will spend the rest of his life in a wheelchair. He successfully sued the party responsible. You, as a member of the jury, are trying to decide what Stephen should receive as a settlement. One part of the settlement is to determine the value of his lost wages. You have determined that Stephen will lose $4,800 a month in wages for the next 35 years because of the accident. Assuming that money is worth 6.35% compounded monthly and the $4,800 would have been received at the end of each month, what is a fair settlement?
A. $808,237.20 B. $2,016,000 C. $812,514.12 D. $152,991.95
29. You leased retail space 12 years ago for $6,450 per month, payable at the beginning of each month. Your lease is for 20 years and allows you to sublease the space. You have decided to move your business to another location and sublease to Thai Pagoda Palace for $8,500 at the beginning of each month for the remainder of the lease. What is the value of your position (referred to as a leasehold interest), assuming that money is worth 6.7% compounded monthly?
A. $152,021.83 B. $633,853.79 C. $152,870.62 D. $630,334.42
30. Paul is a 43-year-old construction worker and decides to start a retirement plan. He figures his income for the next 10 years will be sufficient to deposit $1,000 at the end of each quarter into his retirement plan earning 7.8% compounded quarterly. After 10 years, he will let the money sit for another 13 years, without making additional deposits, until he is 66 years old. What amount will Paul have when he turns 66?
A. $353,162.56 B. $163,111.83 C. $251,821.18 D. $43,120
31. Suppose that Carnegie Steel Corporation set aside $245,000 at the end of each quarter for 14 years into a special fund to use for environmental clean-up costs. The fund earns 7.65% compounded quarterly. For the next 6 years, the company increased its deposits to $350,000 per quarter. Find the amount in this account at the end of the 20-year period.
A. $40,682,952.92 B. $11,549,846.73 C. $48,662,377.65 D. $29,314,030.67
CHAPTER 13
Unit 13.1 Sinking funds
1. You want to start an accounting business and estimate it will take $14,000 to get started. If you want to start your business in 4 years, how much must you deposit today, assuming you can earn 5.1% compounded quarterly?
A. $14,714 B. $11,431.20 C. $6,316.62 D. $13,308.19
2. You want to start an accounting business and estimate it will take $14,000 to get started. If you want to start your business in 4 years, how much must you deposit at the beginning of each quarter, assuming you can earn 5.1% compounded quarterly?
A. $794.33 B. $784.33 C. $3,390.54 D. $558.51
3. You want to start an accounting business and estimate it will take $14,000 to get started. If you want to start your business in 4 years, and you can deposit $6,000 today, what additional amount must you deposit at the end of each quarter, assuming you can earn 5.1% compounded quarterly?
A. $27.99 B. $1,861.91 C. $377.40 D. $372.65
4. Maria just turned 18 and can save $250 a month, starting in 1 month. If Maria can earn 6.5% compounded monthly, what age will she be when she accumulates $1,000,000?
A. 66 years old B. 48 years old C. 577 years old D. 30 years old
5. You want to begin saving money for your child’s college education by creating a tuition fund. In 18 years, you want to have $25,000 in the fund. If the tuition fund earns 4.45% compounded semiannually, what amount must you deposit at the beginning of each 6 months?
A. $544.16 B. $1,119.56 C. $460.36 D. $450.34
6. You want to start an accounting business and estimate it will take $14,000 to get started. If you can deposit $4,000 today, and an additional $1,000 at the end of each quarter, how long until you can start your business, assuming you can earn 5.1% compounded quarterly?
A. 4.70 quarters B. 4.76 quarters C. 9.04 quarters D. 8.94 quarters
7. A Chinese auto manufacturer issues 2,000,000 yuan (¥) of 6.5% 20-year bonds to upgrade its assembly line. Terms of the bond require annual deposits into a sinking fund for retirement of the bonds when they mature. Assuming the manufacturer can earn 7.85% compounded annually, how much must be deposited into the fund at the end of each year?
A. ¥48,346..82 B. ¥51,512.79 C. ¥44,435.89 D. ¥41,201.56
8. Michelle wants to start college in 3 years, and figures that she needs to save up $10,500 between now and then to help pay for her tuition and living expenses. How much should Michelle set aside at the beginning of each month to reach this goal, assuming her savings earn 3.7% compounded monthly?
A. $275.38 B. $276.23 C. $138.83 D. $3,478.51
Unit 13.2 Annuities
9. Gretchen Swane sold her business for $525,000 and deposits the money in a savings plan that earns 5.75% compounded monthly. If she wants to live off the interest without withdrawing any of the principal, what amount will Gretchen be able to withdraw at the end of each month?
A. $7,608.70 B. $2,275 C. $30,187.50 D. $2,515.63
10. Gretchen Swane sold her business for $525,000 and deposits the money in a savings plan that earns 5.75% compounded monthly. If she withdraws $2,000 at the beginning of each month, what will the balance be in 10 years?
A. $606,814.19 B. $608,363.58 C. $1,256,612.21 D. $530,170.94
11. Gretchen Swane sold her business for $525,000 and deposits the money in a savings plan that earns 5.75% compounded monthly. If she withdraws $3,000 at the beginning of each month, how many months will the plan last?
A. 376.35 months B. 381.47 months C. 370.63 months D. 375.49 months
12. Gretchen Swane sold her business for $525,000 and has decided to deposit the money in a savings plan that earns 5.75% compounded monthly. If Gretchen wants the savings plan to last 30 years, how much can she withdraw at the beginning of each month?
A. $18,739.96 B. $3,049.15 C. $3,063.76 D. $28,546.10
13. A wealthy citizen sets up a trust for scholarships at a local community college. The gift is for $3,500,000 and the money is distributed at the beginning of each year for the next 175 years. If the trust earns 5.25% compounded annually, how much is available for scholarships each year?
A. $174,606.88 B. $183,773.74 C. $194,856.72 D. $204,100.66
Unit 13.3 Loan payments
14. You would like to remodel your kitchen at a cost of $13,000. Your bank will loan you the money at 8.2% for 4 years. Determine your monthly payment.
A. $318.59 B. $316.43 C. $3,305.71 D. $1,090.82
15. If you purchase some living room furniture for $1,750 and the store finances the entire amount over 24 months at a monthly rate of 1.75%, what is your monthly payment?
A. $30.63 B. $103.54 C. $89.92 D. $74.25
16. You need a $230,000 mortgage loan and the bank agrees to a 25-year loan at 7 7/8% interest. Determine your monthly payment.
A. $1,741.79 B. $1,756.93 C. $1,756.17 D. $21,316.53
17. You are thinking about getting a 40-year $225,000 mortgage at 6.25% interest, with monthly payments. How much interest would you pay over the 40 years?
A. $1,277.41 B. $613,156.80 C. $225,000 D. $388,156.80
18. Several years ago you got a mortgage loan at 5.7% interest. You currently owe $38,746.77 with a monthly payment of $446.90. How long until the loan will be paid off?
A. 112 months B. 184.78 months C. 72.78 months D. 32.15 months
Challenge problems
19. Linda’s grandmother loaned her $57,000 to help her start an Internet specialty clothing business for tall women. They agreed that Linda will pay the entire amount, together with interest at 3.75% compounded annually, in 6 years. Find the amount Linda will need to repay the loan.
A. $69,391.95 B. $59,137.50 C. $69,825 D. $71,089.18
20. Linda’s grandmother loaned her $57,000, interest-free, to help her start an Internet specialty clothing business for tall women. Linda must repay the $57,000, in one lump sum, in 6 years. How much could Linda deposit at the end of each month into a savings plan earning 4.2% compounded monthly so she will have the $57,000 in 6 years?
A. $695.05 B. $44,322.45 C. $8,550.33 D. $697.48
21. The Woodland Municipal Authority has borrowed $3.2 million from a group of investors. No payments will be made to the investors until the note matures in 6 years, at which time the investors will be paid the maturity value plus interest at 6.1% compounded annually. The deal requires that the municipal authority make annual deposits to a sinking fund at the end of each year to accumulate the full amount that will be due in 6 years. Calculate the amount of the annual deposits, assuming the sinking fund earns 4.65% compounded annually.
A. $677,072.86 B. $474,616.79 C. $453,527.53 D. $652,806.44
22. Zachary Snyder is 28 years old and hopes to be able to retire 30 years from now, at age 58, with a nest egg of $1,000,000. He decides to start depositing money into an investment account that will pay 8% compounded semimonthly. Zachary arranges with his employer to have automatic withdrawals from each semimonthly paycheck, with the money going into his investment account. Calculate the amount of each automatic withdrawal, assuming the withdrawals are made at the end of each semimonthly period.
A. $332.92 B. $670.98 C. $334.03 D. $1,440.82
23. Guy Keehn is dreaming of retiring at the age of 66, 3 years from now. He would like his retirement plan to provide him with $1,800 a month for 30 years (until he is 96). He currently has $109,000 in savings to deposit into a retirement plan that earns 7.2% compounded monthly. What additional amount must Guy deposit at the end of each month for the next 3 years so that he can then receive $1,800 at the end of each month for the following 30 years?
A. $3,527.89 B. $3,549.06 C. $3,245.56 D. $6,313.08
24. Steve and Stephanie Crane want to set up a college fund for their son, Alex, who will be starting college in 15 years. Tuition is currently $7,650 a year, but is expected to increase at a rate of 3.85% compounded annually. Steve and Stephanie decide to create a college fund by making deposits at the end of each year. In 15 years, they would like Alex to be able to make 4 annual withdrawals from the fund (at the beginning of each year). If the college fund earns 6.7% compounded annually, how much must they deposit at the end of each year for 15 years? Note: Assume that tuition will remain the same for the 4 years of college.
A. $1,872.37 B. $1,997.82 C. $3,413.71 D. $3,199.36
CHAPTER 14
Unit 14.1 Cost of installment buying
1. Gaye Dugan is thinking about buying a car and getting a 5-year $12,000 car loan from her credit union. Gaye’s monthly payment is $200 ($12,000 ( 60 payments = $200). (T or F)
2. Suppose you get a 7% installment loan and are charged a $100 front-end processing fee. Your APR will be greater than 7%. (T or F)
3. You are thinking about buying a boat, priced at $16,200. You must pay tax and license fees of $1,100. You have $2,500. If you use your $2,500 toward the purchase, how much will you need to borrow?
A. $16,200 B. $20,100 C. $13,700 D. $14,800
4. You borrow $24,500 to buy a car. Your monthly payment on the 5-year loan is $496.77. What is your total finance charge?
A. $29,806.20 B. $5,306.20 C. $23,844.96 D. $2,483.85
5. You buy a car for $18,000. You must also pay tax and license fees of $1,200. You borrow $17,000 for 4 years at 7.25% interest, with monthly payments of $409.06. What is the total cost of the car, to the nearest dollar, including finance charges?
A. $19,200 B. $36,200 C. $19,635 D. $21,835
Unit 14.2 Paying off an installment loan
6. Interest is generally more during the latter part of an installment loan. (T or F)
7. With the U.S. Rule, interest is calculated on the basis of a 360-day year. (T or F)
8. With the U.S. Rule, interest is calculated through which date?
A. Due date B. Date on borrower’s check
C. Postmark on borrower’s envelope D. Date received by lender
9. You get a car loan on September 22. Your first monthly payment is due October 22. The lender receives your payment on October 20. For how many days is interest calculated?
A. 28 days B. 29 days C. 30 days D. 31 days
10. You buy a motorcycle on July 1 for $2,500 with $500 down. You agree to pay the seller the remaining $2,000 at 9% with monthly payments of $341.14. Your first payment is due August 1, but you make the payment on August 4. Using the U.S. Rule, calculate the remaining balance after that payment.
A. $1,673.86 B. $1,675.63 C. $1,675.86 D. $1,677.93
11. Troy Hancey has been making payments on his 9.5% boat loan for what seems like forever! Troy made a payment on May 1. His balance after that payment was $3,129.84. He just sold some stock and decides to use part of the money to pay off the boat loan on May 24. Calculate the payoff amount.
A. $3,129.84 B. $3,149.39 C. $3,427.17 D. $3,148.58
Unit 14.3 Open-end credit
12. For an annual rate of 14.5%, find the monthly periodic rate. Express the rate with 6 decimal places.
A. 1.208333% B. 14.500000% C. 174.000000% D. 1.210000%
13. You are thinking about getting a credit card. One company charges 18% interest; another charges interest of 2.25% per month. You should get the one that charges 2.25% per month. (T or F)
14. You have a charge card. You receive a bill, dated June 5. Your balance fluctuated during the 31-day billing period as follows: the balance was $520 for the first 3 days, $780 for the next 5 days, $225 for the next 10 days, $840 for the next 5 days, and $1,120 for the last 8 days. Calculate your average daily balance.
A. $697.00 B. $695.67 C. $673.23 D. $112.42
15. Calculate the finance charge on a home equity loan based on an average daily balance of $52,850 during a 31-day billing period. The lender charges 8.25% interest and calculates interest based on the resulting daily periodic rate. Assume a 365-day year and round the daily periodic rate to 8 decimal places.
A. $1,194.55 B. $1,193.44 C. $370.31 D. $369.96
Challenge problems
16. Ag Granger is thinking about buying a car, priced at $7,700. He must also pay tax and license fees of $550. He borrows $6,500 on a 3-year loan with monthly payments of $200.70. What is the total cost of the car, including finance charges?
A. $8,250 B. $7,225.20 C. $15,475.20 D. $8,975.20
17. Darci Kighorn gets a 7.5% $9,300 car loan on July 14 with monthly payments of $224.86. Payments are due on the 14th of each month, starting August 14. The lender receives her first payment on August 15 and her second payment on September 12. What is the balance after the second payment? (T or F)
A. $8,936.29 B. $8,962.86 C. $8,963.99 D. $8,880.28
CHAPTER 15
Unit 15.1 Home ownership and mortgage loans
1. A personal residence is considered personal property rather than real estate because you hold it for personal use. (T or F)
2. In the event a foreclosure sale does not provide a lender with all the money due, the lender is, in all states, prevented from collecting the deficiency from the borrower. (T or F)
3. Mariko Miyamoto stops making his mortgage payments and his home is sold at a foreclosure sale for $265,000. Mariko owes $223,200 on his first mortgage (including past-due interest, attorney’s fees, and court costs) and owes $58,200 on a second mortgage. How much will the second lender receive from the sale?
A. $41,800 B. $58,200 C. $265,000 D. $223,200
4. Mortgage interest rates change from time to time. (T or F)
5. Ruby decides to get prequalified for a mortgage loan. She earns $4,200 a month. Based on the price home she hopes to buy, the lender estimates property taxes at $1,500 a year and insurance at $600. Ruby’s car payment is $242 and her minimum credit card payment is $15. Based on a back-end ratio of 41%, what is the maximum monthly payment she qualifies for?
A. $1,290 B. $1,722 C. $1,465 D. $1,547
6. You get a 40-year $180,000 mortgage loan, with monthly payments of $1,184.53. What is the total interest for the entire 40 years?
A. $568,574.40 B. $180,000 C. $748,574.40 D. $388,574.40
7. Assume you buy a home for $165,000 and get a 25-year 8% $145,000 mortgage loan, with monthly payments (PI) of $1,119.13. The lender requires that you maintain an escrow account for payment of property taxes and insurance. Property taxes are currently $2,125 per year and insurance is currently $575 per year. What will your total monthly payment (PITI) be?
A. $1,119.13 B. $1,296.22 C. $1,369.13 D. $1,344.13
8. Once a mortgage payment (PITI) is established, the payment will never change. (T or F)
Unit 15.2 Paying off a mortgage loan and increasing equity
9. You get a 6.5% $140,000 mortgage loan with a monthly payment (PI) of $884.90. Calculate interest for the first payment.
A. $758.33 B. $9,100.00 C. $57.52 D. $792.53
10. You get a 7% $150,000 mortgage loan with a monthly payment (PI) of $997.95. What is the balance after the first monthly payment is made?
A. $149,125.00 B. $149,002.05 C. $150,122.95 D. $149,877.05
11. The final payment on a mortgage loan is, for all loans, the same as the other payments. (T or F)
12. Amortization schedules are often printed for mortgage loans, so both the lender and borrower know the interest portion of each payment, the principal portion, and the unpaid balance. It is also a good idea to get a printed amortization schedule for a car loan. (T or F)
13. You bought a home 8 years ago for $168,000 and got a $150,000 mortgage loan. You spent $15,000 on improvements. Your mortgage balance is currently $134,200. Your home is now worth $233,000. What is your equity in the home?
A. $233,000 B. $65,000 C. $50,000 D. $98,800
Unit 15.3 Amortization with a financial calculator
14. Assume you get a 15-year $165,000 mortgage loan at 8.2% interest. What is your monthly payment?
A. $1,585.10 B. $13,530 C. $11,610.89 D. $1,595.94
15. Assume you get a 15-year $165,000 mortgage loan at 8.2% interest. Use the amortization registers of your calculator to find the interest portion of the first monthly payment.
A. $2,251.80 B. $1,127.50 C. $1,124.30 D. $558.51
16. Assume you get a 15-year $165,000 mortgage loan at 8.2% interest, with monthly payments. Use the amortization registers of your calculator to find the balance after payment 100.
A. $98,101.87 B. $97,176.29 C. $66,878.13 D. $92,695.87
17. Assume you get a 15-year $165,000 mortgage loan at 8.2% interest, with monthly payments. Use the amortization registers of your calculator to find the exact amount of the final monthly payment.
A. $1.56 B. $1,597.50 C. $1,594.38 D. $1,595.94
18. You want to buy a 4-unit townhouse for $535,000 and give the seller $85,000 down. The seller finances the remaining $450,000 over 20 years at 6.5% interest. Assuming that your first monthly payment is due June 1, what is the interest for the first calendar-year?
A. $3,355.08 B. $28,915.98 C. $14,549.91 D. $16,957.18
19. You want to buy a 4-unit townhouse for $535,000 and give the seller $85,000 down. The seller finances the remaining $450,000 over 20 years at 6.5% interest. Assuming that your first monthly payment is due June 1, what is the interest for the second calendar-year?
A. $28,478.75 B. $14,549.91 C. $16,957.18 D. $30,817.07
Unit 15.4 Repayment variations and loan charges
20. You get a 30-year ARM at a rate of 4.85%. The rate is adjusted each year to the 1-year T-bill rate plus 0.75%. The loan has a 1% annual cap. One year later the T-bill rate is 5.44%. What rate will you pay the second year?
A. 5.85% B. 6.19% C. 5.44% D. 6.44%
21. You get an interest-only mortgage loan of $270,000 at 8.5%. For the first 3 years, your monthly payments are interest-only. What is your monthly payment for those 3 years?
A. $2,124.09 B. $22,950 C. $1,912.50 D. $70,875
22. You apply for a home-equity loan. You have a first mortgage, with a current balance of $143,200. Based on an appraisal of $270,000 and a 75% LTV, what is the maximum line of credit you can get?
A. $59,300 B. $270,000 C. $95,100 D. $126,800
23. Which type of loan fee is used to buy down the interest rate?
A. Origination fee B. Title insurance fee C. Points D. Appraisal fee
24. You get a $420,000 mortgage loan with ¾ of a point. What dollar amount do you pay for points?
A. $750 B. $7,500 C. $75 D. $3,150
25. Calculate total loan costs on a $180,000 mortgage loan with a ½% origination fee, $600 processing fee, $60 credit report fee, $450 appraisal fee, $657 title insurance fee, $300 document preparation fee, $150 closing fee, and $75 for recording.
A. $3,192 B. $2,292 C. $2,792 D. $2,342
26. You get a 7.25% $150,000 mortgage loan and pay $3,200 in front-end loan costs. Your APR is 7.25%. (T or F)
Challenge problems
27. You can get a 15-year $320,000 mortgage loan at 8.5% interest, with a monthly payment of $3,151.17, or a 40-year $320,000 loan at 9.25%, with a monthly payment of $2,530.11. How much more interest would you pay with the 40-year loan?
A. $621.06 B. $647,242.20 C. $327,242.20 D. $483,242.20
28. You get a mortgage loan on May 4 and are required to deposit $855 into the escrow account at that time. Your first payment is due June 1, in the amount of $1,844.23 ($1,644.23 PI + $200 TI). The lender pays property taxes of $1,744 from your escrow account on November 15. Calculate your escrow balance at the end of the calendar year.
A. $1,400 B. $2,255 C. $11,520.61 D. $511
CHAPTER 16
Unit 16.1 Stocks
1. When a corporation earns a profit, the board of directors can elect to pay part or all of the profits to stockholders. (T or F)
2. If a corporation goes out of business, creditors are paid before preferred stockholders. (T or F)
3. Happy Corporation has issued 575,000 shares of common stock and 100,000 shares of cumulative preferred stock. Annual dividends on the cumulative preferred stock are $4 per share. Last year, dividends of $2.50 per share were paid to preferred stockholders. This year the company has $1,990,000 net income and the board of directors decide to distribute 60% of net income as dividends. If you own 300 shares of common stock in Happy Corporation, what will the total amount of your annual dividend be? Round your final answer to the nearest dollar.
A. $336 B. $750 C. $414 D. $783
4. Because of federal law, all stockbrokerage companies charge the same commission. (T or F)
5. The second largest stock exchange in the world is known as the Dow Jones Stock Exchange. (T or F)
6. A bull market occurs when investors are optimistic about the overall economy and the stock market. (T or F)
7. Observe the following stock quote. What was the closing price the day prior to this day?
| | | | | | | | |
|52 weeks | | |PE |Vol | |Net | |
|High |Div |Yld % |Ratio |100s |Close |Change | |
|Low | | | | | | | |
A. $15.75 per share B. $19.75 per share C. $19.62 per share D. $19.88 per share
8. Observe the following stock quote. How many shares were traded this day?
| | | | | | | | |
|52 weeks | | |PE |Vol | |Net | |
|High |Div |Yld % |Ratio |100s |Close |Change | |
|Low | | | | | | | |
A. 984 shares B. 9,840 shares C. 98,400 shares D. 984,000 shares
9. Observe the following stock quote. Determine the Yld% (to the nearest tenth of a percent).
| | | | | | | | |
|52 weeks | | |PE |Vol | |Net | |
|High |Div |Yld % |Ratio |100s |Close |Change | |
|Low | | | | | | | |
A. 0.85% B. 1.08% C. 0.01% D. 1.29%
10. You buy 200 shares of stock at a price of 38.50 and incur brokerage fees totaling $130. Calculate your total cost.
A. $7,830 B. $7,570 C. $7,731 D. $33,700
11. You sell 300 shares of stock at a price of 67.88 and incur brokerage fees totaling $214. Calculate your net proceeds.
A. $20,578 B. $20,150 C. $281.88 D. Another amount
12. ABC stock is selling for $55 per share. Earnings per share are $4.82. What is the PE ratio? Use one decimal place in your answer.
A. 11.4 B. 0.1 C. 11.2 D. 0.2
13. What does a price earnings (PE) ratio of 18 mean?
A. For each $100 paid, you can expect $18 in annual dividends.
B. For each $100 paid, you can expect $18 of annual earnings.
C. For each $1 of annual earnings, you must pay $18 for the stock.
D. For each $1 of annual dividends, you must pay $18 for the stock.
14. You are thinking about buying one of two stocks. The first has a PE ratio of 11.5, the second has a PE ratio of 22.3. Based on PE ratios (i.e., assume that future earnings will remain the same as recent earnings), the first is the better buy. (T or F)
Unit 16.2 Bonds
15. Corporate bonds are generally in denominations of $5,000. (T or F)
16. Many municipal bonds are tax-exempt. (T or F)
17. Bonds that have a high degree of risk generally pay a lower than normal interest rate. (T or F)
18. You are thinking about buying a 6-year old 30-year 8% bond that pays interest annually. If the prevailing rate for similar bonds is 5.75%, how will your 8% bond be priced?
A. At par B. At a discount C. At a premium
19. Refer to the following bond quote. What is the coupon rate?
| | | | | |
|Bond |Cur Yld |Vol |Close |Net Chg |
| | | | | |
|ATT 7[pic]32 |7.36 |28 |96¾ |- 1¼ |
A. 7.36% B. 22% C. 96.75% D. 7.125%
20. Refer to the following bond quote. In what year does the bond mature?
| | | | | |
|Bond |Cur Yld |Vol |Close |Net Chg |
|ATT 7[pic]32 |7.36 |28 |96¾ |- 1¼ |
A. 32 years from the date the bond was issued B. 28 years from now
C. 2032 D. 32 years from now
21. Refer to the following bond quote. Based on a $1,000 face value, what was the price for the last bond traded?
| | | | | |
|Bond |Cur Yld |Vol |Close |Net Chg |
| | | | | |
|ATT 7[pic]32 |7.36 |68 |96¾ |- 1¼ |
A. $96.75 B. $967.50 C. $96.34 D. $963.40
22. What price do you pay for a $5,000 Treasury bond based on a quote of 118:14?
A. $5,118.14 B. $5,907.00 C. $5,922.00 D. $5,921.88
Unit 16.3 Mutual funds
23. A mutual fund has total assets of $28,346,000 and liabilities of $7,289,000. There are 720,000 shares outstanding. What is the NAV?
A. $39.37 B. $3.89 C. $29.25 D. $27.63
24. With a front-end mutual fund, no additional shares are sold by the company after the initial offering. (T or F)
Challenge problems
25. With an investment in stocks, you become an owner of the corporation. (T or F)
26. The value of both stocks and bonds can change during ownership. (T or F)
27. Assuming a 28% tax rate, what is the after-tax rate of a 7.5% corporate bond?
A. 2.10% B. 26.79% C. 9.60% D. 5.40%
28. Suppose you buy a 7.6% bond. Interest is paid semiannually. What is the annual percentage yield (APY)?
A. 7.60% B. 3.80% C. 7.74% D. 15.20%
CHAPTER 17
Unit 17.1 Solving for interest rate paid
1. Nathaniel would like to buy a sound system for his house that will cost $18,000 to install. The credit union will loan him the money at 8.49% interest with monthly payments over 4 years. The credit union will charge $200 for an origination fee, and will add that fee to the loan amount. What is the APR?
A. 10.31% B. 8.49% C. 9.07% D. 0.76%
2. You buy a guitar for $2,750. You pay $250 down and the store finances the remainder with 36 monthly payments of $111.40. Calculate your APR.
A. 101.40% B. 2.20% C. 2.82% D. 33.8%
3. You buy a used electronic drum set from a neighbor for $9,500. Your neighbor agrees to finance the entire amount with payments of $235 per month for 48 months, starting now. What is the annual rate your neighbor is charging?
A. 8.69% B. 9.08% C. 8.62% D. 0.72%
4. You buy a wedding gown for $2,999, plus sales tax of 7.5%. The retailer finances the entire amount (including the sales tax) for 3 years and says you will be charged 12% interest. However, the retailer uses the add-on method. Calculate your monthly payment.
A. $121.79 B. $107.08 C. $99.61 D. $106.02
5. You buy a wedding gown for $2,999, plus sales tax of 7.5%. The retailer finances the entire amount (including the sales tax) for 3 years and says you will be charged 12% interest. However, the retailer uses the add-on method. Calculate the real rate you are paying the retailer.
A. 18.8% B. 26.60% C. 21.20% D. 22.57%
6. You just received your bill to renew your membership in the NRA. You have the option of paying the $279 annual dues now or paying the dues in four equal quarterly installments (starting today). If you decide to pay in installments, a $5 carrying charge will be added to each of the four payments. What interest rate will you be paying if you choose to pay in four installments?
A. 4.82% B. 2.83% C. 19.28% D. 11.31%
7. Assume you buy a home and borrow $125,000 at 6.4% for 20 years. You pay a total of $6,238 for origination fee, points, and mortgage insurance. In addition you pay other loan costs of $2,182. You pay the first year’s hazard insurance premium of $385 and are required to deposit $295 into an escrow account. What is the reportable APR?
A. 7.05% B. 7.30% C. 7.34% D. 7.37%
8. Assume you buy a home and borrow $125,000 at 6.4% for 20 years. You pay a total of $6,238 for origination fee, points, and mortgage insurance. In addition you pay other loan costs of $2,182. You pay the first year’s hazard insurance premium of $385 and are required to deposit $295 into an escrow account. What is the real APR, assuming the loan is not paid off early?
A. 7.05% B. 7.30% C. 7.34% D. 7.37%
9. Assume you buy a home and borrow $125,000 at 6.4% for 20 years. You pay a total of $6,238 for origination fee, points, and mortgage insurance. In addition you pay other loan costs of $2,182. You pay the first year’s hazard insurance premium of $385 and are required to deposit $295 into an escrow account. Assume you will pay off the loan at the end of 5 years. What is your real APR, reflecting the early payoff?
A. 7.05% B. 7.30% C. 8.16% D. 8.30%
10. You currently owe $118,580.44 on your mortgage loan, with an interest rate of 6.8%. Interest rates are currently 6.2% and you are thinking about refinancing, in which case you will borrow $120,000 for 15 years. You will incur loan costs of $2,150 on the new loan (payable in cash when you get the loan). There is no prepayment penalty on the old loan for paying it off early. Calculate your real APR on the new loan, assuming you do not pay it off early.
A. 7.05% B. 6.82% C. 6.20% D. 6.49%
11. You currently owe $118,580.44 on your mortgage loan, with an interest rate of 6.8%. Interest rates are currently 6.2% and you are thinking about refinancing, in which case you will borrow $120,000 for 15 years. You will incur loan costs of $2,150 on the new loan (payable in cash when you get the loan). You must also pay a $3,000 prepayment penalty on the old loan for paying it off early. Calculate your real APR on the new loan, assuming you do not pay it off early.
A. 6.90% B. 7.04% C. 6.71% D. 6.80%
Unit 17.2 Growth rates
12. Dianne and Joe got married 18 years ago and purchased a home in Monrow, Michigan, for $228,000. They now are thinking about selling their home and moving into something that requires less upkeep. Homes like theirs are currently selling for $360,000. At what average annual rate has their home increased in value?
A. 2.57% B. 6.26% C. 3.84% D. 4.30%
13. One way of measuring inflation is through the use of the consumer price index (CPI), which tracks the cost of a “basket of good” (food, housing, medical care, fuel, etc.). The base year of the current index is 1983, when the basket of goods cost $100. The CPI was 9.9 in 1913 (meaning the same basket of goods cost $9.90), and 252.0 in 2018. Calculate the average annual rate of inflation for the period 1913 to 2018.
A. 4.22% B. 3.13% C. 6.06% D. 11.54%
14. Fifteen years ago your annual salary was $27,600; it is now $46,200. The inflation rate over the last 15 years has averaged 3.5% per year. At what average annual rate has your salary increased?
A. 3.49% B. 167% C. 67% D. 11%
15. In 1912, a head of lettuce cost 10 cents. In 2018, a head of lettuce cost $1.98. What is the average annual rate of increase?
A. 4.10% B. 203% C. 2.54% D. 2.86%
16. If the cost of a barrel of oil increased over a 20-year period from $5 a barrel to $105 a barrel, what is the average annual rate of increase?
A. 124% B. 5.65% C. 16.44% D. 24%
Unit 17.3 Solving for interest rate earned
17. Stephen Duran purchased a gold coin 10 years ago for $750. He just sold the coin for $1,600. What interest rate, compounded annually, did Stephen earn on the investment?
A. 46.83% B. 7.87% C. 14.31% D. 8.2%
18. You just bought a 5.8% $1,000 bond for $859.50, immediately after the annual interest payment was paid to the previous owner. The bond matures in 16 years. What is the YTM?
A. 4.12% B. 7.8% C. .95% D. 7.32%
19. You just bought a 7.5% $1,000 bond for $1,115.40, immediately after the semiannual interest payment was paid to the previous owner. The bond matures in 12 years. What is the YTM?
A. 6.13% compounded semiannually B. 3.06% compounded semiannually
C. 6.53% compounded semiannually D. 13.07% compounded semiannually
20. You bought a 7.5% $1,000 bond for $1,115.40, immediately after the semiannual interest payment was paid to the previous owner. You sold the bond 5 years later for $975, less brokerage fees of $30, immediately after you received the semiannual interest payment. What is your yield during ownership?
A. 3.93% compounded semiannually B. 2.45% compounded semiannually
C. 2.22% compounded semiannually D. 4.45% compounded semiannually
21. You buy 20 mutual fund shares at a price of $57.40 per share. You elect to reinvest distributions and, as a result, own 27.47 shares in 4 years. You sell the shares at a price of $66.30 per share, less brokerage fees of $30. Calculate your annual rate of return.
A. 12.69% B. 14.56% C. 12.23% D. 11.76%
22. You invest $300 each month (starting today) into a mutual fund. You reinvest distributions. At the end of 25 years, you sell all of your shares and receive $105,740. Calculate your rate of return.
A. 1.25% compounded monthly B. 15.04% compounded monthly
C. 0.49% compounded monthly D. 2.25% compounded monthly
Unit 17.4 Cash flow problems
23. You have the chance to buy a promissory note in which you will receive 36 monthly payments of $750 (starting a month from now), followed by 12 monthly payments of $850. If you buy the note, what is the total amount you will receive?
A. $36,200 B. $37,200 C. $57,600 D. $19,200
24. You have the chance to buy a promissory note in which you will receive 36 monthly payments of $750 (starting a month from now), followed by 12 monthly payments of $850. What is your yield if you buy the note for $35,000?
A. 2.95% compounded monthly B. 3.15% compounded monthly
C. 4.66% compounded monthly D. 0.13% compounded monthly
25. You have the chance to buy a promissory note in which you will receive 36 monthly payments of $750 (starting a month from now), followed by 12 monthly payments of $850. If you want to earn a rate of return (yield) of at least 5.5% compounded monthly, what is the most you could pay for this promissory note?
A. $36,222.89 B. $33,237.25 C. $25,631.50 D. $29,200.15
26. You and two business partners are thinking about buying a 20-unit rental property for $1,560,000, by paying $500,000 down and paying the seller the remaining $1,060,000 with monthly payments. Your projected cash flows for each year are shown below. You project you will be able to sell the property at the end of year 5 for $1,700,000; your selling expenses will be $95,000 and you will still owe the seller $810,100. Calculate the IRR, based on your projections. Note: Assume that the cash flows are received at the end of each year.
Year 1: - $5,480 Year 2: -$1,780 Year 3: $20,090
Year 4: $48,300 Year 5: $61,700 Year 5 (from sale): $794,900
A. 13.10% B. 11.07% C. 5.38% D. 10.14%
Challenge problems
27. You bought 150 shares of stock at a price of $45.13 per share and incurred brokerage fees totaling $75. Four years later, you sold the stock at a price of $50.33 per share and incurred brokerage fees totaling $85. Calculate your rate of return.
A. 2.19% B. 2.47% C. 2.48% D. 2.77%
28. You bought 150 shares of stock at a price of $45.13 per share and incurred brokerage fees totaling $75. You received dividends of $1.95 per share at the end of each year. Immediately after receiving the fourth annual dividend, you sold the stock at a price of $50.33 per share and incurred brokerage fees totaling $85. Calculate your rate of return.
A. 5.18% B. 6.48% C. 6.33% D. 6.96%
29. You bought 150 shares of stock at a price of $45.13 per share and incurred brokerage fees totaling $75. You received dividends of $292.50 at the end of year 1, $307.50 at the end of year 2, nothing at the end of year 3, and $300 at the end of year 4. Immediately after receiving the fourth annual dividend, you sold the stock at a price of $50.33 per share and incurred brokerage fees totaling $85. Calculate your rate of return.
A. 4.36% B. 5.97% C. 5.41% D. 6.02%
30. Todd McKinley is in a 34% tax bracket. What is Todd’s after-tax rate of return on a corporate bond that pays 7.22% interest?
A. 6.88% B. 2.45% C. 4.77% D. 7.22%
31. Find the Annual Percentage Yield (APY) for a 7% bond paying interest semiannually.
A. 7% B. 3.5% C. 14% D. 7.12%
CHAPTER 18
Unit 18.1 Income statements
1. An income statement reflects profits of a business for a given period of time. (T or F)
2. A real estate appraisal business is a service company, not a merchandising company. (T or F)
3. A business had revenues of $122,000 and total expenses of $48,000. What is the net income or loss?
A. $74,000 net income B. $122,000 net income
C. $74,000 loss D. $170,000 net income
4. A business had a net loss of $18,000 and revenues of $110,000. What must expenses have been?
A. $92,000 B. $18,000 C. $110,000 D. $128,000
5. A business had net income of $27,000 and total expenses were $71,500. What must revenues have been?
A. $44,500 B. $98,500 C. $71,500 D. $27,000
6. Calculate net sales based on gross sales of $910,000, sales returns and allowances of $7,800, and sales discounts of $18,200.
A. $884,000 B. $936,000 C. $920,400 D. $899,600
7. Calculate cost of goods sold based on $85,200 beginning inventory, $247,000 cost of goods purchased, and $88,800 ending inventory.
A. $421,000 B. $73,000 C. $243,400 D. $250,600
8. Calculate gross profit based on net sales of $242,000 and cost of goods sold of $92,800.
A. $334,800 B. $149,200 C. $242,000 D. $92,800
Unit 18.2 Balance sheets
9. Current assets are those that have been purchased within the last 12 months. (T or F)
10. Office equipment is classified as an intangible asset. (T or F)
11. On October 31, Peggy Brown Real Estate Company had assets and liabilities as follows: cash, $14,800; accounts receivable, $800; office equipment, $14,000; accumulated depreciation on office equipment, $2,100; accounts payable, $600. Calculate Peggy's equity in the business.
A. $26,900 B. $31,100 C. $32,300 D. $28,100
12. Assets should be shown on a balance sheet at current value, not cost. (T or F)
13. Assets are $180,000. Equity is $73,000. What must liabilities be?
A. $253,000 B. $180,000 C. $73,000 D. $107,000
14. For corporations, what is the equity section of a balance sheet called?
A. Owner's equity B. Corporate equity
C. Stockholder's equity D. Retained earnings
15. For a personal financial statement, what is the official title for the difference between assets and liabilities?
A. Equity B. Personal equity C. Net worth D. Individual equity
Unit 18.3 Trend and ratio analysis
16. Horizontal analysis is done while laying down, while vertical analysis is done standing up. (T or F)
17. For a certain year, a business had gross sales of $412,000; for the next year, gross sales were $477,508. Calculate the percent increase or (decrease).
A. 13.7% B. (13.7%) C. 15.9% D. (15.9%)
18. For a certain year, net sales were $395,000 and expenses were $189,600. What percent of net sales were expenses?
A. 2.08% B. 208% C. .48% D. 48%
19. On December 31, a business had cash of $23,100, accounts receivable of $42,000, inventory of $58,100, total assets of $130,600, total liabilities of $45,000, total current assets of $123,200, and total current liabilities of $22,000. Calculate the current ratio.
A. 1.1 B. 2.9 C. 5.9 D. 5.6
20. On December 31, a business had cash of $23,100, accounts receivable of $42,000, inventory of $58,100, total assets of $130,600, total liabilities of $45,000, total current assets of $123,200, and total current liabilities of $34,300. Calculate the acid-test ratio.
A. 1.9 B. 2.9 C. 4.8 D. 3.6
21. On December 31, a business had current liabilities of $28,300, total liabilities of $95,000, current assets of $68,000, and total assets of $183,000. Calculate the debt ratio.
A. 51.9% B. 192.6% C. 335.7% D. 41.6%
22. A business had inventory of $72,000 on December 31 of Year 1, and $74,000 on December 31 of Year 2. Cost of goods sold was $461,700 during year 2. Calculate the inventory turnover (to the nearest tenth) for year 2.
A. .2 B. 3.2 C. 6.3 D. .3
23. A business had net income, before tax of $62,500; net income, after tax of $45,800; total assets of $755,700; and equity of $512,000. Calculate the return on equity.
A. 8.3% B. 12.3% C. 6.1% D. 8.9%
24. What does a current ratio of 1.8 mean?
A. The business had approximately $1.80 in sales for each $1 of inventory.
B. The business had approximately $1.80 in cash for each $1 of accounts payable.
C. The business had approximately $1.80 in total assets for each $1 of total liabilities.
D. The business had approximately $1.80 in current assets for each $1 of current liabilities.
25. A business with a current ratio of less than 1 can improve the ratio by paying off its accounts payable. (T or F)
Challenge problems
26. For which entity are the owner(s) not personally responsible for the company's debts?
A. Sole Proprietorship B. Partnership C. Corporation D. All three
27. Which U.S. business entity is responsible for submitting a separate federal income tax return but does not pay federal income tax with the return?
A. Sole proprietorship B. Partnership C. Corporation D. All three
28. For which entity are distributions of extra cash taxable to the owners?
A. Sole proprietorship B. Partnership C. Corporation D. All three
29. Some corporations have fewer owners than partnerships have. (T or F)
30. A three-person partnership quits doing business and has only $40,000 with which to pay $100,000 of debts. Who is responsible for the $60,000 difference?
A. The partners are not personally liable for the business debts.
B. Each partner is liable for exactly $20,000.
C. Any of the partners may be sued for the entire $60,000.
31. ABC Corporation had annual profit of $1,500,000. Assume that the corporation pays 40% of profit as federal and state income taxes; the remainder is paid to stockholders as dividends. Assuming that stockholders pay 35% of dividends as federal and state income taxes, determine the total percent of income taxes paid as a result of the $1,500,000 profit.
A. 75% B. 25% C. 61% D. 39%
32. Smith & Watts Accounting Service had income and expenses for the year as follows: accounting fees earned, $785,000; salaries expense, $425,000; rent expense, $60,000; utilities expense, $15,000; depreciation expense, $8,000; office supplies expense, $1,500; insurance expense, $5,000. Annual net income was $270,500. (T or F)
CHAPTER 19
Unit 19.1 Inventory methods: Assigning a cost to ending inventory
1. Many businesses that use a perpetual inventory system verify their inventory records with a periodic physical inventory. (T or F)
2. A hardware store carries a True-Balance model hammer. Assume that the company had 8 of these hammers at the beginning of the year at a cost of $12.45 each and purchased additional True-Balance hammers as follows: 10 for $12.75 each on March 23; 15 at $12.95 on May 5; 28 at $13.00 on July 23; and 15 at $13.10 on September 18. Calculate the total cost of hammers available for sale.
A. $946.20 B. $76.70 C. $981.85 D. $882.25
3. A hardware store carries a True-Balance model hammer. Assume that the company had 8 of these hammers at the beginning of the year at a cost of $12.45 each and purchased additional True-Balance hammers as follows: 10 for $12.75 each on March 23; 15 at $12.95 on May 5; 28 at $13.00 on July 23; and 15 at $13.10 on September 18. Use the specific identification method to determine ending inventory. Assume an ending inventory of 7 hammers, as follows: 1 from the beginning inventory, 1 from the March 23 purchase, 2 from the July 23 purchase, and 3 from the September 18 purchase.
A. $92.42 B. $87.15 C. $91.70 D. $90.50
4. A hardware store carries a True-Balance model hammer. Assume that the company had 8 of these hammers at the beginning of the year at a cost of $12.45 each and purchased additional True-Balance hammers as follows: 10 for $12.75 each on March 23; 15 at $12.95 on May 5; 28 at $13.00 on July 23; and 15 at $13.10 on September 18. Use the FIFO method to determine the cost of ending inventory. Assume an ending inventory of 7 hammers.
A. $90.44 B. $90.50 C. $91.70 D. $87.15
5. A hardware store carries a True-Balance model hammer. Assume that the company had 8 of these hammers at the beginning of the year at a cost of $12.45 each and purchased additional True-Balance hammers as follows: 10 for $12.75 each on March 23; 15 at $12.95 on May 5; 28 at $13.00 on July 23; and 15 at $13.10 on September 18. Use the LIFO method to determine the cost of ending inventory. Assume an ending inventory of 7 hammers.
A. $90.44 B. $90.50 C. $91.70 D. $87.15
6. A sporting goods store carries a 2-person tent. During the year, the store had 48 of these tents in inventory, with a total cost of $11,632.80. The store had 6 of the tents at the end of the year. Use the weighted average method to determine the total cost of the 6 tents in ending inventory.
A. $242.35 B. $1,938.80 C. $1,454.10 D. Another value
7. Figure the COGS for a store, based on the following: $350,000 total assets, $282,000 cost of goods available for sale, and ending inventory of $24,100.
A. $656,100 B. $257,900 C. $68,000 D. $325,900
8. If a business were to use the FIFO method, its COGS would be $23,408. If the LIFO method were used, COGS would be $24,197. Which inventory method would result in the greatest profit?
A. FIFO B. LIFO C. COGS doesn’t affect profit
Unit 19.2 Overhead: Spreading the cost to departments
9. Which criteria would be more meaningful in allocating rent expense to departments?
A. Building value B. Employees C. Monthly sales D. Floor space
10. A store had monthly rent of $37,000. Determine the unrounded share for Department 3, based on building value per department as follows: $425,000 (Dept 1), $515,000 (Dept 2), $350,000 (Dept 3), and $450,000 (Dept 4).
A. $9,037.36 B. $8,880.00 C. $7,442.53 D. $7,400.00
11. A store had monthly utility expense of $14,200. Determine the unrounded share for Department 1, based on total floor space for each department as follows: 24,000 sq ft (Dept 1), 37,000 sq ft (Dept 2), 14,400 sq ft (Dept 3), and 33,400 sq ft (Dept 4).
A. $3,132.35 B. $3,124.00 C. $64,373.33 D. $64,545.45
Challenge problems
12. A store had total monthly administrative wages of $17,500. Allocate the $17,500 based on the number of employees per department. Department 1 has 14 employees, Department 2 has 13, Department 3 has 28, and Department 4 has 11. Determine the allocation for Department 2, rounded to the nearest $100. Remember, the total rounded amounts for all departments must total $17,500.
A. $3,300 B. $3,400 C. $3,500 D. $3,600
13. Midtown Office Supply has a beginning inventory of 4 copy machines at a cost of $470 each. During the year, the company purchased 12 copy machines at $480, 8 at $465, and 20 at $455. At the end of the year the company had 3 copy machines left. Calculate the cost of ending inventory using (1) weighted average, (2) FIFO, and (3) LIFO. Which method results in the greatest ending inventory?
A. Weighted average B. FIFO C. LIFO D. All the same
CHAPTER 20
Unit 20.1 Depreciation for financial accounting
1. Your business buys a desk for $1,500. You project you can sell the desk for $400 at the end of its 10-year useful life. For financial accounting purposes, what is the asset’s depreciable basis?
A. $1,500 B. $1,100 C. $110 D. $400
2. Your business buys a desk for $1,500. You project you can sell the desk for $400 at the end of its 10-year useful life. If you take $110 depreciation each year, what is the book value at the end of year 3?
A. $770 B. $330 C. $1,170 D. $1,390
3. To claim depreciation, all of these guidelines must be met: (1) the business must own the asset, (2) the asset must have a life longer than 18 months, and (3) the asset must be something that does not wear out. (T or F)
4. Your business buys a copy machine on January 8 for $1,500. You project you can sell the machine for $300 at the end of its 5-year useful life. For financial accounting purposes, what is the first year’s depreciation using the straight-line method?
A. $300 B. $240 C. $1,200 D. $200
5. Your business buys a copy machine on January 8 for $1,500. You project you can sell the machine for $300 at the end of its 5-year useful life. For financial accounting purposes, what is the first year’s depreciation using the 200% declining-balance method?
A. $480 B. $500 C. $600 D. $750
6. You purchased a delivery truck on November 19 for $24,000. You anticipate that the truck has a useful life of 80,000 miles and a salvage value of $6,000. Use the units-of-production method to calculate depreciation (rounded to the nearest dollar) for year 1, assuming the truck was driven 3,844 miles during year 1.
A. $865 B. $1,153 C. $300 D. $72
7. You purchased a desk on August 21 and paid for the desk on September 10. The desk was delivered on September 8, but because you were remodeling your office, you did not begin using the desk until September 18. For how many months can you take depreciation in the first calendar year?
A. 3 months B. 4 months C. 5 months D. 7 months
8. You purchased a filing cabinet for $1,500 on September 20. You project that you can sell the filing cabinet for $300 at the end of its 5-year useful life. For financial accounting purposes, calculate depreciation for the first calendar year using the straight-line method.
A. $240 B. $67 C. $60 D. $70
Unit 20.2 Depreciation for federal income taxes (MACRS)
9. For MACRS, salvage value is ignored. (T or F)
10. For MACRS, assets with a 27.5-year life are presumed to have been purchased in the middle of the month, regardless of the actual purchase date. (T or F)
11. For MACRS, what is the recovery period for a computer?
A. 2 years B. 5 years
C. 7 years D. Taxpayer selects years
12. For MACRS, what is the recovery period for an apartment building?
A. 15 years B. 20 years C. 27.5 years D. 39 years
13. Determine Year 1 MACRS depreciation for a 5-year property purchased on March 18 for $3,000. The asset should be worth about $500 at the end of 5 years. Use the appropriate MACRS table from your text.
A. $600 B. $500 C. $450 D. $500
14. Determine Year 2 MACRS depreciation for a 5-year property purchased on May 5 for $3,000. The asset should be worth about $500 at the end of 5 years. Use the appropriate MACRS table from your text.
A. $800 B. $960 C. $640 D. $600
15. Determine Year 1 MACRS depreciation (to the nearest dollar) for a residential rental property purchased June 30 for $800,000. Assume land value is $150,000. Use a 27.5-year life.
A. $15,760 B. $7,880 C. $13,069 D. $12,805
16. Determine Year 12 MACRS depreciation (to the nearest dollar) for an office building purchased April 22 for $1,200,000. Assume land value is $300,000. Use the alternative 40-year method.
A. $22,500 B. $4,689 C. $23,076 D. $30,000
17. There is no MACRS depreciation in year 4 for a 3-year property. (T or F)
18. In May 2018, Montgomery & Associates purchased new office furniture at a cost of $1,035,200. Assuming they took the maximum Section 179 expense deduction, what is the total deduction (including depreciation) they could take on the office furniture for the year?
A. $1,000,000 B. $27,040 C. $147,902 D. $1,005,030
Challenge problems
19. Your business buys a delivery truck on August 5 for $35,000. You project that you can sell the truck for $7,000 at the end of its 5-year useful life. Calculate total depreciation for calendar-years 1 through 3 using the 200% declining balance method. Round each annual amount to the nearest dollar before adding.
A. $27,440 B. $24,500 C. $11,117 D. $24,920
20. Your business buys a delivery truck on August 5 for $35,000. You project that you can sell the truck for $12,000 at the end of its 5-year useful life. Calculate total depreciation for calendar-years 1 through 3 using MACRS. Round each annual amount to the nearest dollar before adding. Assume you take no Section 179 expense deduction.
A. $24,920 B. $19,616 C. $27,440 D. $11,117
CHAPTER 21
Unit 21.1 Federal income tax
1. Taxpayers are responsible for errors on a federal income tax return, even if the error is based on bad advice from the IRS. (T or F)
2. If taxable income is less than $100,000 we use the tax tables to figure income tax. (T or F)
3. Figure 2017 federal income tax on taxable income of $69,400, head of household.
A. $12,111 B. $13,481 C. $9,606 D. $11,609
4. Ken and Tracie Grundy have 2017 taxable income of $153,400. Assuming they file jointly, what is their federal income tax (rounded to the nearest dollar)?
A. $24,973 B. $6,972 C. $29,837 D. $36,569
5. Towers, Inc. has 2017 taxable income of $13,567,800. Calculate federal income tax.
A. $3,567,800 B. $1,248,730 C. $4,648,730 D. $4,748,730
Unit 21.2 Sales tax
6. When retailers buy goods for resale, they must pay sales tax, but only on the amount after trade discounts and cash discounts are deducted. (T or F)
7. You bought a stapler for $21.95. Based on a sales tax rate of 5.75%, what is the total amount due?
A. $23.21 B. $1.26 C. $20.69 D. $23.18
8. You are thinking about buying a car for $21,700. If you trade in your old vehicle for $4,500, calculate the 7.25% sales tax assuming that sales tax is figured on the net price.
A. $23,273.25 B. $18,447.00 C. $1,573.25 D. $1,247.00
9. You are shopping for a car. You can buy the car from a dealer in your city for $17,500, with sales tax of 6.5%. You can buy the car for $17,300 from a dealer in a different part of the state, with sales tax of 8.2%. You will save $81.10 by buying from the dealer in your city. (T or F)
Unit 21.3 Property tax
10. In the U.S., property tax is charged by federal, state, and local governments. (T or F)
11. Nora Leone owns a neighborhood shopping center. The county assessor estimated the fair market value to be $1,675,000. If this type of property is assessed at 30% of fair market value, the assessed value is $502,500. (T or F)
12. A school district has an annual budget of $498,500,000 and total assessed property within its jurisdiction of $55,872,302,780. Determine the tax rate for the school district. Note: Express the rate as a decimal with 6 decimal places; round the last digit up.
A. 112,080.848104 B. .008922 C. .008923 D. .892214
13. Calculate property tax based on an assessed value of $115,800 and a tax rate of .006822.
A. $7.90 B. $789.99 C. $822.77 D. $82.28
14. Property tax for a home with an assessed value of $77,400 and a tax rate of $1.6432 per $100 is $127.18. (T or F)
15. Property tax for a warehouse with an assessed value of $1,822,300 and a tax rate of 9.865 mills is:
A. $17,976,989.50 B. $1,797,698.95 C. $179,769.90 D. $17,976.99
Challenge problems
16. Delmer Smiley is single and has 2017 taxable income of $70,655. What tax bracket is Delmer in?
A. 25% B. 28% C. 33% D. 35%
17. Miguel and Jessica Ramirez have 2017 taxable income of $69,853. Assuming they file as married filing jointly, find the rate of tax for their average dollar of taxable income. Round to the nearest whole percent.
A. 15% B. 14% C. 20% D. 13%
18. Suppose your home has a fair market value of $225,000 and homes are assessed at 70% of value. Based on a tax rate of 15.234 mills, what is your property tax?
A. $23,993.55 B. $3,427.65 C. $2,399.36 D. $239.94
CHAPTER 22
Unit 22.1 Property insurance
1. If an insured property is damaged, the insured will be reimbursed for the loss, no matter what caused the loss. (T or F)
2. Assume you bought a fancy camera 2 years ago for $1,800. Because of its age, the camera is now worth only $600. A similar camera costs $1,350 new (technological advances have resulted in a lower price). Assume that your camera is stolen and you have insurance that covers theft. What amount will you receive from the insurance company if reimbursement is based on replacement cost and you have a $250 deductible policy?
A. $1,550 B. $1,350 C. $1,100 D. $350
3. ABC Insurance Company cancels Kirk Swenson's property insurance policy. Based on a $336 annual premium, 208 days of protection before cancellation, and a 365-day year for prorating, what amount will be refunded?
A. $336.00 B. $191.47 C. $144.53 D. $527.47
4. Some homeowner’s policies cover more hazards than other homeowner’s policies. (T or F)
5. Refer to the rates of Illustration 22-1. Suppose you buy an HO-3 basic policy in the amount of $180,000. Figure your annual premium, assuming (1) your home is classified in premium group 2, (2) you get an 8% discount because the home is less than 10 years old, (3) you get a 2% discount for having a smoke alarm, and (4) you pay an extra $45 for additional liability coverage. Round your final answer to the nearest dollar.
A. $537 B. $536 C. $532 D. $533
6. Homeowner’s policies typically cover personal belongings as a percent of the policy’s face value. (T or F)
7. Refer to the rates of Illustration 22-2. Calculate the annual premium for a 48-unit apartment building with a replacement cost of $1,800,000. Assume that the building is masonry and is in premium group 4. Figure the premium based on a $2,500 deductible and $1,000,000 of liability coverage. Round your final answer to the nearest dollar.
A. $4,860 B. $4,568 C. $4,928 D. $5,220
8. For auto insurance, collision coverage pays for damage to whose car?
A. Only the insured’s car
B. Only the other driver’s car
C. Both cars
D. Only the car of the party who was not at fault
9. No-fault insurance takes effect when no one was at fault for the accident. (T or F)
Unit 22.2 Life insurance
10. With what type of life insurance can the policyholder increase, decrease, or suspend premiums, provided some cash reserve is maintained?
A. Whole-life B. Term insurance C. Decreasing term D. Universal life
11. With decreasing term insurance, the premium decreases over the life of the policy. (T or F)
12. Refer to Illustration 22-3. Boyd Strom is 30 years old. Calculate the fourth year's annual premium for $130,000 of 15-year term insurance. Round to the nearest dollar.
A. $346 B. $398 C. $1,252 D. $1,518
13. Refer to Illustration 22-3. Dustin Shaw is 22 years old. Calculate the second year's annual premium for $250,000 of whole-life insurance.
A. $1,765 B. $635 C. $1,690 D. Another amount
14. Refer to Illustration 22-3. Allison Miner is 31 year old. Calculate her annual premium for $150,000 of term insurance.
A. $411 B. $1,263 C. $381 D. $483
15. Assume that Oscar Krisch, age 50, decides to quit paying premiums on a $175,000 whole-life policy that he got when he was 35. If Oscar elects to receive the cash value, what amount will he receive?
A. $25,725 B. $64,750 C. $175,000 D. $46,200
16. Assume that Oscar Krisch, age 50, decides to quit paying premiums on a $175,000 whole-life policy that he got when he was 35. If Oscar elects to have insurance for the remainder of his life without paying any more premiums, what amount of coverage will he have?
A. $175,000 B. $25,725 C. $64,750 D. $95,900
Challenge problems
17. You get a bill for your auto insurance premium. You can pay the 6-month premium of $480 today, or you can pay with monthly installments (starting today). With monthly installments, a $10 carrying charge will be added to each payment. If you elect to pay on the installment method, what annual interest rate are you, in effect, paying?
A. 4.97% B. 52.13% C. 41.67% D. 59.61%
18. Stanley is trying to decide whether to get whole-life insurance (with an annual premium of $1,070) or 15-year term insurance (with an annual premium of $210). His insurance agent tells him that the cash value for the whole-life policy will be $21,300 in 15 years. Calculate the rate Stanley earns on the savings plan portion.
A. 6.81% B. 3.46% C. 3.92% D. 6.04%
19. Nic dies. Angie, his wife, is the beneficiary of his $150,000 life insurance policy. She is thinking about taking the money as a “fixed period annuity” instead of taking the $150,000 in one lump sum. With the fixed period annuity, she will receive $875 at the end of each month for 25 years. If she elects to take the money monthly, what interest rate will she earn on the money?
A. .41% B. 4.98% C. .42% D. 5.02%
CHAPTER 23
Unit 23.1 Length, area, and volume: Applications
1. If the ground is level, at what angle should the wall of a building be in relation to the ground?
A. 45 degrees B. 90 degrees C. 180 degrees D. 360 degrees
2. A rectangle is a type of square. (T or F)
3. Find the perimeter. Dimensions are in feet; some are not shown.
[pic]
4. A farmer wants to fence a rectangular field measuring 660 ft ( 1,320 ft. How many feet of fencing are required?
A. 871,200 ft B. 1,980 ft C. 3,960 ft D. 7,920 ft
5. Which is the smallest: diameter, radius, or circumference?
A. Diameter B. Radius C. Circumference
6. A large earthmoving machine has tires with a diameter of 12 ft. Approximately how far does it travel for each revolution of the tires?
A. 38 ft B. 19 ft C. 12 ft D. 113 ft
7. The trunk of a redwood tree has a circumference of 20 ft. What is its approximate diameter?
A. 62.8 ft B. 31.4 ft C. 6.37 ft D. 3.18 ft
8. Determine the area of a rectangular field measuring 200 ft ( 425 ft.
A. 625 sq ft B. 1,250 sq ft C. 220,625 sq ft D. 85,000 sq ft
9. A circular fountain is surrounded by a circular walkway 42 in. wide. The diameter of the fountain is 20 ft. What is the approximate area (in square feet) of the walkway?
A. 572.265 sq ft B. 886.265 sq ft C. 478.065 sq ft D. 258.265 sq ft
10. A home has measurements as shown. Dimensions are in feet; some are not shown. What is the square footage of the home?
[pic]
11. From a fire observation tower, a forest ranger can see a distance of 48 miles in all directions. How many square miles can be observed from the tower?
A. 2,304 sq mi B. 7,234.56 sq mi C. 150.72 sq mi D. 28,938.24 sq mi
12. A container measures 6 ft long, 3 ft deep, and 4 ft high. Calculate the volume.
A. 72 cu ft B. 13 cu ft C. 26 cu ft D. 36 cu ft
13. A theater is 40 ft wide, 80 ft deep, and 18 ft high. Allowing 250 cubic feet of airspace per patron, what is the maximum number of tickets that should be sold for each movie?
A. 230 B. 57,600 C. 388 D. 251
14. An underground gasoline storage tank has a diameter of 30 ft and is 12 feet tall. Find the approximate volume.
A. 360 cu ft B. 33, 912 cu ft C. 2,826 cu ft D. 8,478 cu ft
Unit 23.2 Unit costs and converting measurements (U.S. to U.S.)
15. You have the choice of buying a 68-oz bottle of soda pop for $1.39 or a six-pack of 12-oz cans for $1.59. The bottle is cheaper per ounce. (T or F)
16. A fence is to be built around an outdoor basketball court measuring 36 feet ( 32 feet. If fencing costs $5.25 per lineal foot, what will the fencing cost?
A. $357 B. $6,048 C. $714 D. $628
17. You want to lay sod in an area measuring 62 ft ( 48 ft. If sod costs 22¢ per square foot plus $50 for delivery, what is the total cost?
A. $2,976 B. $3,026 C. $654.72 D. $704.72
18. You want to build a home containing 1,452 sq ft. What is the cost, based on a cost per sq ft of $57.25?
A. $83,127 B. $1,509.25
C. $36,827.27 D. Need more information
19. Determine the total shipping weight of a carton containing two dozen cans of beans. Each can contains 13.5 oz of beans. Each can (empty) weighs 1 oz, and the cardboard carton (empty) weighs 10 oz. Express the total shipping weight in pounds and ounces.
A. 22 lb 6 oz B. 3 lb 3 oz
C. 20 lb 14 oz D. Need more information
20. You are adding a new family room to your home. The room measures 16 ft ( 20 ft. Calculate the cost of carpeting (to the nearest dollar) based on a cost of $23 per square yard. Assume there is no waste.
A. $320 B. $818 C. $7,360 D. $273
21. A utility company is purchasing a right-of-way through a farm. If the strip of land is 5,280 ft long and 100 ft wide and the utility company is paying $22,000 per acre, how much will the farmer receive?
A. $11,616,000,000 B. $2,200,000 C. $266,667 D. $12.12
22. How many days will 100 yards of dental floss last if you use 16 inches each time you floss your teeth and you floss each morning and evening?
A. 225 days B. 18.75 days C. 112.5 days D. 37.5 days
Challenge problems
23. The distance from Miami to Seattle is 3,403 miles. A car is driven this distance using tires with a radius of 14 inches. Approximately how many revolutions does each tire make?
A. 204,366 B. 2,452,389 C. 12,835,454,846 D. 47,642
24. The earth has a circumference of approximately 25,000 miles. If a satellite is in orbit 350 miles above the surface of the earth, approximately how many miles does it travel each time it circles the earth?
A. 26,100 miles B. 25,350 miles C. 13,600 miles D. 27,200 miles
25. You are planning on painting a room that measures 15 ft ( 15 ft, with a ceiling height of 9 ft; you will paint the walls and ceiling with the same color paint. There are 2 windows in the room, each measuring 4 ft ( 4 ft. The door measures 3 ft ( 7 ft. Assume that a gallon of paint will cover 200 square feet; you cannot buy part of a gallon. Find the cost of the paint, if the paint costs $29 per gallon.
A. $712 B. $116 C. $145 D. $206
26. You have purchased some land for your dream home. The land is somewhat below street grade and requires fill dirt to bring it to proper grade. Your land measures 125 ft ( 175 ft and is an average of 33 inches below grade. Approximately how many cubic yards of fill dirt are required?
A. 2,228 cu yd B. 60,156.25 cu yd C. 1,624,218.75 cu yd D. 26,736 cu yd
27. A farmer has land measuring 1,320 ft ( 1,320 ft. The farmer is thinking about installing a circular sprinkling system, in which case, the corners of the land will not be watered. Approximately how many square feet of land will not be farmed if a circular sprinkling system is installed?
A. 1,742,400 sq ft B. 1,367,784 sq ft C. 5,471,136 sq ft D. 374,616 sq ft
28. An 18-hole golf course has a total of 7,322 yards. If there are 125 yards from the clubhouse to the first tee, an average of 50 yards between each green and the next tee, and 125 yards from the 18th green to the clubhouse, how many miles would you walk for an 18-hole round (from clubhouse to clubhouse)? Hint to non golfers: Each hole has a tee (where the golfer begins the hole) and a green (where the hole is completed).
A. 1.60 mi B. 4.33 mi C. 4.79 mi D. 4.81 mi
29. You want to install a concrete driveway with dimensions of 21 ft ( 30 ft 6 in. The concrete is to be 4 in. thick. Approximately how many cubic yards of concrete will you need?
A. 213.5 cu yd B. 2,570.4 cu yd C. 7.9 cu yd D. 94.9 cu yd
30. A container made of wood measures 6 ft long, 5 ft deep, and 4 ft high. How many square feet of wood are required to build the container? Remember, the container is enclosed on all sides.
A. 120 sq ft B. 74 sq ft C. 148 sq ft D. 222 sq ft
CHAPTER 24
Unit 24.1 Monetary exchange rates: Significance in international business
1. International currency has existed since 1903. (T or F)
2. A U.S. company sells a $5,500 product to a Swiss firm. Calculate the price, in Swiss francs, based on an exchange rate of 1 U.S. dollar = 1.25867 Swiss francs.
A. 6,922.69 francs B. 4,369.69 francs C. 5,501.26 francs D. 5,498.74 francs
3. Based on an exchange rate of 1 U.S. dollar = 1.07880 Canadian dollars, how many U.S. dollars would you get for 825 Canadian dollars?
A. $890.01 B. $764.74 C. $826.08 D. $823.92
4. A U.S. company negotiates a $32,800 sale to a French firm. Based on an exchange rate of 1 U.S. dollar = 0.79983 euros, calculate the price in euros.
A. 41,008.71 euros B. 206,125.04 euros C. 26,234.42 euros D. 29,207.48 euros
5. A U.S. company sold a product to a Japanese firm. Thirty days later, the U.S. company received a check for 142,800 yen. Based on an exchange rate of 1 U.S. dollar = 138.22 yen, what amount, in U.S. dollars, will the U.S. firm receive from its bank?
A. $142,938.22 B. $19,737,816 C. $1,033.14 D. $142,661.78
6. One way to avoid the risk associated with fluctuating exchange rates is to insist that payment be made in your own currency. (T or F)
7. A U.S. company buys an office building in London for 18,000,000 British pounds, based on an exchange rate of 1 U.S. dollar = .62570 British pounds. Four years later, the U.S. firm sells the building for 19,500,000 British pounds, based on an exchange rate of .68420. How much money, in U.S. dollars, did the U.S. company make or lose on the investment?
A. Lost $2,079,300 B. Made $267,341.62 C. Made $2,079,300 D. Lost $267,341.62
Unit 24.2 Metric system: Significance in international business
8. Very few countries use the metric system. (T or F)
9. A newborn baby weighs about 3 g. (T or F)
10. A pencil is about 20 cm long. (T or F)
11. A can of soda pop contains about 35 liters. (T or F)
12. Write 48.2 centimeters using standard metric abbreviations.
A. 48.2 cg B. 48.2 mm C. 48.2 cm D. 48.2 cλ
13. 1 mm is greater than 1 cm. (T or F)
14. 1 mλ is greater than 1 λ. (T or F)
15. 1 kg is greater than 1 cg. (T or F)
16. 2,200 mm =____________cm
A. 22 cm B. 220 cm C. 22,000 cm D. 220,000 cm
17. 3,400 mλ = _____________λ
A. 340 λ B. 34 λ C. 3.4 λ D. 3,400,000 λ
18. Use the approximate equivalents of Illustration 24-4: 28 kg = lb
A. 61.73 lb B. 12.70 lb C. 28 lb D. .99 lb
19. Use the approximate equivalents of Illustration 24-4: 100 yd = m
A. 109.36 m B. 91.44 m C. 108.44 m D. 93.36 m
20. Use the approximate equivalents of Illustration 24-4: 64 λ = gal (liquid)
A. 242.26 gal B. 67.73 gal C. 60.57 gal D. 16.91 gal
21. Use the approximate equivalents of Illustration 24-4: 12 oz = g
A. 340.19 g B. .42 g C. 3.40 g D. 34.02 g
22. A company sells pancake mix in 64-oz packages. Use the approximate equivalents of Illustration 26-4 to determine the metric equivalent (to the nearest gram) for the pancake mix?
A. 1,814 g B. 163 g C. 2 g D. 1,630 g
23. The high temperature in Chicago was 92(F. The high in Rome on the same day was 35(C. It was warmer in Rome. (T or F)
24. At what temperature does water freeze?
A. 0(F B. 100(F C. 32(C D. 0(C
Challenge problems
25. A U.S. firm needs 15 U.S. tons (T) of a certain mineral. The seller, in Scotland, quotes a price of 980 British pounds per metric ton. Using the approximate equivalents of Illustration 24-4 and an exchange rate of 1 U.S. dollar = .6479 pounds, calculate the total price, in U.S. dollars, for the quantity needed. Note: Do not round intermediate results.
A. $20,583.18 B. $8,640.29 C. $250.10 D. $10,498.45
26. After arriving in Canada on a vacation, you pull into a gasoline station. You notice that the price of gas is 1.45 Canadian dollars per liter. Using the approximate equivalents of Illustration 24-4 and an exchange rate of 1 U.S. dollar = 1.01855 Canadian dollars, calculate the price, in U.S. dollars per U.S. gallon. Note: Do not round intermediate results.
A. $5.49 per gallon B. $1.42 per gallon C. $5.39 per gallon D. $4.37 per gallon
CHAPTER 25
Unit 25.1 The three Ms: Mean, Median, and Mode
1. A class of 7 students got scores of 79, 95, 66, 85, 71, 100, and 71. What is the mean?
A. 79 B. 71 C. 81 D. 77
2. A class of 7 students got scores of 79, 95, 66, 85, 71, 100, and 71. What is the median?
A. 79 B. 71 C. 81 D. 77
3. A class of 7 students got scores of 79, 95, 66, 85, 71, 100, and 71. What is the mode?
A. 79 B. 71 C. 81 D. 77
4. Consider the 6 home sales of Action Real Estate during the week: $105,000, $145,000, $105,000, $163,000, $2,300,000, and $140,000. What is the mean?
A. $142,500 B. $493,000 C. $471,822 D. $478,300
5. Consider the 6 home sales of Action Real Estate during the week: $105,000, $145,000, $105,000, $163,000, $2,300,000, and $140,000. What is the median?
A. $140,000 B. $145,000 C. $493,000 D. $142,500
6. Consider the 6 home sales of Action Real Estate during the week: $105,000, $145,000, $105,000, $163,000, $2,300,000, and $140,000. What is the mode?
A. There are 6 modes B. There is no mode C. $142,500 D. $105,000
7. Consider the 6 home sales of Action Real Estate during the week: $105,000, $145,000, $105,000, $163,000, $2,300,000, and $140,000. Which indicator (mean, median, or mode) best represents the average?
A. Mean B. Median C. Mode
8. Bob's Hot Tubs sells four models of hot tubs. July's sales are shown below. What is the average (mean) price of hot tubs sold during July?
Model Price Number sold
Economy $3,300 8 A. $4,575.00
Midsize 3,800 14 B. $4,357.89
Large 4,700 10 C. $4,411.72
Luxury 6,500 6 D. $4,108.66
9. Assume that your school uses the following grade points: 4.0 (A), 3.7 (A-), 3.3 (B+), 3.0 (B), 2.7 (B-), 2.3 (C+), 2.0 (C), 1.7 (C-), 1.3 (D+), 1.0 (D), 0.7 (D-), and 0.00 (E). Calculate your GPA for the semester, assuming the following grades:
Course Grade Hours
Accounting B- 5 A. 3.50
English composition A- 3 B. 3.43
Golf A 1 C. 2.75
Business Math B+ 5 D. 3.22
Unit 25.2 Graphs: Presenting data so it is easy to understand
10. Prepare a line graph (using increments of $100,000) for revenues of Whitewater Rafting Company.
Yr 1: $482,000 Yr 2: $563,000 Yr 3: $510,000 Yr 4: $792,000
11. Prepare a vertical bar graph (using increments of $100,000) for revenues of Whitewater Rafting Company.
Yr 1: $482,000 Yr 2: $563,000 Yr 3: $510,000 Yr 4: $792,000
12. Suppose a survey indicated that the average American adult spends the following number of hours per week for each activity: 54 hours for sleep, 24 hours for work, 15 hours for family care, 24 hours for personal care, and 51 hours for leisure. In constructing a circle graph, how many degrees (to the nearest tenth) of the circle should be used for the “work” segment?
A. 14.3 degrees B. 51.4 degrees C. 25.7 degrees D. 48.9 degrees
13. A used car dealer sold 14 cars during the week at prices of $5,800, $12,900, $2,700, $9,400, $15,000, $11,200, $3,620, $5,400, $6,900, $13,800, $7,000, $5,800, $10,300, and $11,900. In preparing a bar graph for grouped data using increments of $4,000 (starting with $0 to $3,999.99), which increment has the most sales?
A. $0 - $3,999.99 B. $4,000 - $7,999.99
C. $8,000 - $11,999.99 D. $12,000 - $15,999.99
Unit 25.3 Measures of dispersion
14. You survey 5 members of a college class about how many hours they study each week: 12 hours, 18 hours, 7 hours, 3 hours, and 15 hours. What is the range?
A. 18 hours B. 15 hours C. 11 hours D. 12 hours
15. You survey 5 members of a college class about how many hours they study each week: 12 hours, 18 hours, 7 hours, 3 hours, and 15 hours. What is the standard deviation for the 5 students?
A. 11 hours B. 6.04 hours C. 5.40 hours D. 15 hours
16. You survey 5 members of a college class about how many hours they study each week: 12 hours, 18 hours, 7 hours, 3 hours, and 15 hours. The class has a total of 28 students. Based on the findings from the 5 students you interviewed, what is the standard deviation for the entire class?
A. 11 hours B. 6.04 hours C. 5.40 hours D. 15 hours
Challenge problems
17. Your savings account balance at the end of May was $500. You made a $200 deposit on June 4 and withdrew $100 on June 25. Calculate your average (mean) daily balance for June.
A. $600 B. $656.67 C. $660 D. $628.33
18. Your test scores so far are 87, 92, 85, 89, and 94. What score do you need on your last test to end up with an average (mean) score of 90?
A. 93 B. 92 C. 95 D. 94
ENRICHMENT TOPICS
Topic 1A Scientific Notation
1. Write 18,456,000,000,000,000 in scientific notation.
A. 1.8456 ( 1016 B. 1.8456 ( 16 C. 1.845616 D. 18,456 ( 1012
2. Write .000000000000456 in scientific notation.
A. 456 ( 10-15 B. 4.56 ( 1013 C. 4.56 ( 10-13 D. 4.56-13
3. Write 7.89123 ( 1016 as a conventional number.
A. 7.89123 ( 16
B. 7,891,230,000,000,000
C. 78,912,300,000,000,000
D. 789,123,000,000,000,000
4. Write 7.1493 ( 10-10 as a conventional number.
A. 714,930,000,000,000
B. 7,149,300,000
C. .0000071493
D. .00000000071493
Topic 1B Binary Number System and Computer-Related Conversions
1. What is the value of 880 ?
A. 88 B. 0 C. 1 D. 0.88
2. The number 300 could be written as:
A. (3 ( 103 ) B. (3 ( 102 ) C. (3 ( 104 ) D. (3 ( 101 )
3. Convert the binary number 10111 to a decimal number.
A. 23 B. 15 C. 4 D. 19
4. Convert the decimal number 76 to a binary number.
A. 1010111 B. 1101011 C. 1011110 D. 1001100
5. Convert the hexidecimal number 7DF2 to a decimal number.
A. 37 B. 32,242 C. 713,152 D. 7,826
6. Convert the number 49,222 to a hexidecimal number.
A. C046 B. 140,106 C. D98C D. C87
7. Convert the binary number 1100011110 to a hexidecimal number.
A. 31E B. 798 C. 2FA D. 4AC
8. Convert the hexidecimal value 4CC to a binary number.
A. 1000111000 B. 1100010110 C. 1001000100 D. 10011001100
9. How many gigabytes is 83.2 terabytes?
A. 832 gigabytes B. 8,320 gigabytes C. .0832 gigabytes D. 83,200 gigabytes
Topic 3A Roots
1. Calculate the value of .
A. 14.4 B. 12 C. 20,736 D. 1.44
2. Calculate the value of
A. 18.52 B. 7 C. 1,029 D. 114.33
3. Calculate the value of
A. 24.47 B. 358,538.57 C. 59.87809 ( 10 D. 299.39
Topic 3B Formulas: The Hows and Whys of Using and Modifying Them
1. The perimeter of a rectangle is found by using the formula: P = 2L + 2W. Find the length (L) if the perimeter (P) is 32 and the width (W) is 4.
A. 12 B. 24 C. 20 D. 40
2. Rewrite the formula P = 2L + 2W for L (so L is on the left by itself).
A. [pic] B. L = P - 2W - 2 C. [pic] D. L = 2W - P - 2
3. Rewrite the formula I = PRT for R (so R is on the left by itself).
A. [pic] B. [pic] C. [pic] D. R = IPT
4. Rewrite the formula A = [pic](B + b)h for B (so B is on the left by itself).
A. B = 2A - bh B. [pic] C. [pic] D. [pic]
Topic 4A Ratios and Proportions
1. In a mayoral election, Bob got 153,428 votes and Margaret got 161,200 votes. What is the ratio of Margaret's votes to total votes cast? Express your answer with a colon.
A. 161,200:153,428 B. 153,428:161,200 C. 153,428:314,628 D. 161,200:314,628
2. In a mayoral election, Bob got 153,428 votes and Margaret got 161,200 votes. What is the ratio of Margaret's votes to total votes cast? Express your answer with a colon, followed by a 1.
A. .51:1 B. 1.05:1 C. .95:1 D. .49:1
3. A 3-lb bag of fertilizer will cover 80 sq ft of garden. If you can buy the fertilizer only in 3-lb bags, how many bags do you need for a 340 sq ft garden?
A. 4 bags B. 5 bags C. 27 bags D. 13 bags
4. A building casts a 15-foot shadow. A yardstick, held vertically, casts a shadow of 9 inches. Estimate the height of the building.
A. 60 ft B. 21.6 ft C. 37.5 ft D. 50 ft
5. A nurse counts 18 heartbeats in 15 seconds. What is the person's heartbeat per minute?
A. 54 beats B. 270 beats C. 90 beats D. 72 beats
6. A 305-mile trip took 12.7 gallons of gas. How far can you expect to travel with a full tank of 19.5 gallons?
A. 3,873.5 mi B. 468.3 mi C. 198.6 mi D. 492.7 mi
7. To determine the number of fish in a lake, a fish and game officer catches 50 fish, tags them, and throws them back into the lake. Later 100 fish are caught; it is found that 7 of them are tagged. Estimate how many fish are in the lake.
A. 35,000 fish B. 714 fish C. 3,500 fish D. 7,143 fish
Topic 4B Using Proportions to Solve Percentage Problems
Note: Because proportions can be used to solve Chapter 4 questions, a different set of problems are not offered here. Instead, use the Chapter 4 test bank questions.
Topic 7A Checks
1. Using this blank check, write a check of $115.25 to Farmer’s Market, dated March 23 of the current year.
[pic]
Topic 8A Overtime for Salaried Employees
1. Some employees are exempt from the Fair Labor Standards Act. (T or F)
2. Nanette Nunge is paid $550 a week as a bookkeeper. If Nanette’s normal workweek is 40 hours, determine her gross pay for a week in which she works 47 hours.
A. $646.25 B. $598.13 C. $694.38 D. $673.22
3. Calvin Ott, an employee subject to the Fair Labor Standards Act, is paid a weekly salary of $480 to perform certain duties. During a certain week he worked 50 hours. Determine Calvin’s gross pay (including overtime).
A. $500 B. $720 C. $624 D. $528
4. Darbi Storm is paid a semimonthly salary of $1,600 as an executive assistant. Her normal workweek is 40 hours, but for 1 week she worked 44 hours. Calculate her gross pay for the pay period.
A. $1,980 B. $1,800 C. $1,710.76 D. $1,720
Topic 9A Discounting Simple Interest Notes
1. Sue Lender loaned Bob Borrower $3,000 on June 13 for 120 days at 9% interest. If Sue sells you the note on September 14 for $3,050, what will your yield be?
A. 17.18% B. 39.35% C. 3.87% D. 4.99%
2. Rocky Rowe loaned Michelle Moss $5,000 on August 13 for 90 days at 14% interest. You have a chance to buy the note from Rocky on September 3. What amount should you pay for the note to get a 17% annual yield? Use a 365-day year.
A. $5,122.50 B. $4,964.50 C. $5,039.23 D. $5,011.54
Topic 10A Introduction to TVM Problems: Formulas, Tables, Financial Calculators
Because there are an ample number of problems for formulas (see Ch 10 and 11 test questions), tables (see Enrichment Topic 10B, and financial calculators (see Ch 12 and 13 test questions), no additional test questions are given for this topic.
Topic 10B Compound Interest Tables
1. 100 years ago, your great-grandfather lost $50 playing poker. If he had not been tempted to get into the poker game and instead had deposited the $50 in a savings account earning 4% compounded annually, how much money would be in the account today?
A. $134.58 B. $2,525.25 C. $61,881.19 D. $3,457.10
2. Jon White spends $1,800 a year ($150 a month) on cigarettes and is considering kicking the habit. If Jon just turned 20 and deposits the money at the end of each year into a savings plan earning 8% compounded annually, how much will he have in his savings plan at age 70, after his final deposit?
A. $1,032,786.29 B. $86,065.52 C. $84,422.90 D. $982,449.27
3. Tuition at a local college is currently $3,000 per year. You want your newborn daughter to attend when she turns 18. If tuition rates are expected to increase at an annual rate of 5%, what will the annual tuition be at the college 18 years from now?
A. $84,397.14 B. $35,068.76 C. $7,219.86 D. $84,788.12
4. Richard’s grandfather gives all of his grandchildren $5,000 on their 30 birthdays. Richard just turned 18. What is the value of the $5,000 gift in today’s dollars, assuming that Richard can earn 12% compounded annually?
A. $1,234.90 B. $1,283.38 C. $2,484.85 D. $2,348.27
5. Assume that you own a manufacturing business and are thinking about purchasing a labor-saving device at a cost of $200,000. The device will last 20 years and save you $20,000 per year in labor costs (assume that the savings are realized at the end of each year). Assuming that you need to earn 12% compounded annually on your money, what is the value of the device?
A. $149,388.88 B. $20,733.40 C. $170,271.28 D. $21,734.20
6. You have the chance to buy a promissory note in which you will receive 50 monthly payments of $700, starting a month from now. If you want to earn 12% compounded monthly, what price should you pay for the note?
A. $5,813.15 B. $27,437.28 C. $21,281.37 D. $21,734.20
7. Eight years ago you bought a 20-year 6% $1,000 bond. The bond pays interest each 6 months. You want to sell the bond. You just received the 16th semiannual interest payment of $30 ($1,000 × 3% periodic rate = $30). Similar bonds are being issued that pay 10% semiannually. What is your bond worth today?
A. $608.12 B. $515.49 C. $579.61 D. $724.03
8. You start a savings plan that earns 8% compounded semiannually by depositing $6,000. You then deposit $200 each 6 months (starting in 6 months). What will your balance be at the end of 5 years?
A. $6,480.22 B. $12,009.40 C. $11,282.66 D. $8,881.44
9. Michael Bowen, a 25-year-old real estate broker, decides to start a retirement plan. He figures that his income for the next 25 years will be sufficient to deposit $750 at the end of each quarter into his retirement plan earning 8% compounded quarterly. After 25 years he will let the money sit for another 10 years, without making additional deposits, until he is 60 years old. What amount will Michael have when he turns 60?
A. $527,440.98 B. $517,066.07 C. $514,032.54 D. $14,144,587.16
10. Your Aunt Gayla decides to sell her office supply business. Andrew Hunt offers to buy the business for $300,000 cash. Rodney Anderson offers to buy the business by paying $14,000 at the end of each 6 months for 10 years, followed by $16,000 at the end of each 6 months for 5 years. Calculate the present value of Rodney’s offer, assuming Aunt Gayla can earn 8% compounded semiannually on her money.
A. $320,038.90 B. $190,264.56 C. $249,491.88 D. $163,666.93
11. You make a $500 deposit into a savings plan and leave the money on deposit for 8 years earning 4% compounded quarterly. Which table would you use to determine the ending balance?
A. Table 1 B. Table 2 C. Table 5 D. Table 7
12. You have the chance to buy a promissory note in which you will receive 50 monthly payments of $700, starting a month from now. You are trying to determine what price you should pay, assuming you want to earn 6% compounded monthly. Do not solve the problem. Instead, what decimal value should you multiply by $700 to get the answer?
A. 44.142786 B. 15.761861 C. .779286 D. .054288
13. Jon White spends $150 a month on cigarettes and is considering kicking the habit. John just turned 25 and would deposit the $150 at the end of each month into a savings plan earning 6% compounded monthly. He wants to know how much money he would have at age 65. Do not calculate the amount; instead, find the decimal value you can multiply by $150 to get the answer.
A. 10.05745 B. 1,991.49073 C. 154.76197 D. 44.15885
14. Uncle Earl promises to give his niece Brittany $55,000 on her 30th birthday, 7 years from now. Uncle Earl can earn 8% compounded quarterly. What amount could Uncle Earl deposit today in a savings plan so that the plan would have the required $55,000 in 7 years?
A. $32,091.95 B. $33,813.87 C. $31,590.63 D. $1,484.85
15. While your dentist is filling a cavity in one of your teeth, he is talking with his dental assistant about the new dental equipment he wants to buy in 5 years for $40,000. He wonders how much money he must deposit at the end of each 6 months to accumulate $40,000. You get his attention and tell him if he will quit drilling for a minute you will help him calculate the amount. What amount is required if he can earn 10% compounded semiannually?
A. $4,184.40 B. $2,945.60 C. $3,719.45 D. $3,180
16. You are thinking about buying a sports car, priced at $29,000. Your bank will loan you $28,500 at 6% for 5 years. Determine your monthly payment.
A. $560.65 B. $541.32 C. $550.98 D. $547.65
17. Calculate the monthly payment on a 15-year $145,000 mortgage loan at 5.75% interest.
A. $1,184.77 B. $1,591.65 C. $1,018.02 D. $1,204.09
18. Pretend you receive an inheritance of $500,000 and deposit it in a savings plan that earns 6.5% compounded monthly. How much can you withdraw at the end of each month if you want the plan to last 40 years?
A. $3,160.35 B. $3,016.80 C. $2,927.30 D. $2,945.29
19. A wealthy citizen sets up a trust for scholarships at a local community college. $80,000 is to be distributed at the beginning of each year over the next 100 years. If the trust earns 10% compounded annually, what amount must be placed in the trust today in one-lump sum?
A. $799,941.92 B. $872,503.63 C. $879,936.11 D. $912,088.48
20. Assume you want to buy a home in 2 years and need to accumulate $8,000 for a down payment. You have $2,500 to deposit today in a savings plan earning 6% compounded monthly. What additional monthly deposit, at the end of each month, is required?
A. $216.26 B. $203.76 C. $229.17 D. $215.92
Topic 12A If Compounding Period and Deposit Period Differ
1. You deposit $100 at the end of each 6 months into a savings plan, earning interest at 6% compounded quarterly. Using a longhand approach, find the ending balance at the end of the third quarter.
A. $309.09 B. $304.52 C. $106.00 D. $101.50
2. You deposit $100 at the end of each 6 months into a savings plan, earning interest at 6% compounded quarterly. Using a longhand approach, find the ending balance at the end of 5 years.
A. $1,146.39 B. $1,147.58 C. $1,069.73 D. $1,070.27
3. You deposit $100 at the end of each year for 15 years and earn interest at 6.25% compounded semiannually. What will the account balance be at the end of 15 years, after your final $100 deposit?
A. $4,855.06 B. $2,372.41 C. $2,390.18 D. $2,390.61
4. You deposit $1,500 at the end of each quarter and earn interest at 6.75% compounded annually. What will the account balance be at the end of 20 years?
A. $245,337.82 B. $250,152.80 C. $245,466.06 D. $59,840.36
5. You deposit $100 at the end of each 6 months and earn interest at 6.5% compounded quarterly. What will your account balance be at the end of 15 years?
A. $4,954.98 B. $10,033.67 C. $4,976.40 D. $4,975.26
Topic 13A Funding an Annuity to Produce Specified Withdrawals
1. Shad is 25 years old and wants to create an annuity for his retirement. He wants to retire at age 60, 35 years from now, and wants his annuity to provide $2,000 a month for 30 years (until he is 90). His plan can earn 7.5% compounded monthly. If Shad makes a one-time deposit today, with no additional deposits, what must the amount of that deposit be (to the nearest dollar)?
A. $286,035 B. $275,112 C. $20,890 D. $25,894
2. Shad is 25 years old and wants to create an annuity for his retirement. He wants to retire at age 60, 35 years from now, and wants his annuity to provide $2,000 a month for 30 years (until he is 90). His plan can earn 7.5% compounded monthly. Shad figures that his income for the next 25 years will be sufficient to make deposits into the annuity plan. He projects that his income for years 26 through 35 will not be enough to continue making deposits, but will be great enough that he will not have to withdraw money from the plan. After this 10 year period, he would like to start making withdrawals of $2,000 at the end of each month for 30 years. How much must Shad deposit at the end of each month for the first 25 years?
A. $162.25 B. $154.38 C. $149.23 D. $985.77
3. Shad is 25 years old and wants to create an annuity for his retirement. He wants to retire at age 60, 35 years from now, and wants his annuity to provide $2,000 a month for 30 years (until he is 90). His plan can earn 7.5% compounded monthly. Shad figures that his income for the next 25 years will be sufficient to make deposits into the annuity plan. He projects that his income for years 26 through 35 will not be enough to continue making deposits, but will be great enough that he will not have to withdraw money from the plan. After this 10 year period, he would like to start making withdrawals of $2,000 at the end of each month for 30 years. Shad just got an income tax refund of $5,000 and can start his annuity plan by depositing that amount. What additional amount must he deposit at the end of each month to reach his desired goal?
A. $117.43 B. $122.87 C. $123.18 D. $824.76
Topic 13B Semimonthly and Biweekly Mortgages
1. You buy a home for $200,000 and get a 30-year $150,000 mortgage loan at 7% interest, structured with semimonthly payments. Calculate the payment.
A. $498.98 B. $498.76 C. $888.49 D. $645.83
2. You buy a home for $200,000 and get a 30-year $150,000 mortgage loan at 7% interest, structured with biweekly payments. Assume that your biweekly payment is exactly half of what a monthly payment would be. Determine the term, in years. Assume the average year has 365.25 days.
A. 613.13 years B. 51.09 years C. 25.55 years D. 23.50 years
Topic 13C Installment Loan Incentive Programs
1. You are thinking about buying a big-screen TV. Dealer A offers the TV at a price of $6,500. Dealer B has a price of $6,950, but will finance the purchase at 2.9% interest over 3 years. If you buy from Dealer A you will borrow at the current rate of 9.5%. Find the equivalent cash price of the TV from Dealer B.
A. $6,950 B. $6,300.02 C. $6,491.30 D. $5,573.90
2. You have decided to purchase a certain sports car. The dealer's price, including tax and license fees, is $19,000. The current interest rate on a 5-year loan is 8.5%. The manufacturer will give you either (1) a $2,500 cash rebate (which you will use to reduce the amount of your loan) or (2) 1.9% financing for 5 years. You will borrow all necessary cash. Which choice (1 or 2) will result in the lowest monthly payment, and by how much?
A. Choice 1; you will save $6.32 a month B. Choice 2; you will save $6.32 a month
C. Choice 1; you will save $57.61 a month D. Choice 2; you will save$57.61 a month
Topic 13D Disguised Prices
1. You see an ad for a car showing monthly payments will be $489 for 66 months at 7.5% interest, assuming the buyer pays $2,000 down plus tax and license fees. The price is not shown in the ad. What is the disguised price? Round the answer to the nearest dollar.
A. $26,379 B. $28,379 C. $24,379 D. $34,274
2. You are thinking about buying a recreational lot. The seller has not quoted a price but is asking for $500 down and $100 a month for 10 years. Based on a prevailing interest rate of 12%, what is the disguised price of the lot?
A. $6,970.05 B. $6,470.05 C. $7,470.05 D. $5,970.05
3. A furniture store advertises an interest-free payment plan, in which the buyer pays the price in one lump-sum six months after the purchase (without any interest). You are thinking about buying $1,200 of furniture. If current interest rates are 11% compounded monthly, what is the equivalent cash price (disguised price) of the furniture?
A. $1,136.07 B. $1,267.53 C. $1,137.44 D. $1,266.00
Topic 13E Affordable Price
1. You want to buy a used car but are unsure what price car you can afford. You have $2,000 for a down payment and can afford a $350 monthly payment. Assume you must pay 6.5% sales tax and $400 additional fees for licensing, etc. If 48-month 10% loans are available and you can borrow money for tax and license fees, what is the maximum price you can pay for a car? Round your final answer to the nearest $100.
A. $13,800 B. $15,800 C. $12,600 D. $14,500
Topic 14A Rule of 78
1. On May 10, you buy a computer. You do not have enough cash, so you get a $1,000 loan at 10% interest. You agree to repay the loan with four monthly payments of $255.23. Assuming the lender uses the Rule of 78, calculate interest for the first monthly payment.
A. $5.23 B. $8.37 C. $8.33 D. $8.29
2. For a loan using the Rule of 78, calculate the denominator for a 48-month loan.
A. 1,176 B. 48 C. 49 D. 1,152
3. You buy a car and get a 60-month $15,000 loan at 9% interest, resulting in monthly payments of $311.38. Use the Rule of 78 to calculate interest for the third monthly payment.
A. $109.51 B. $112.50 C. $116.72 D. $114.70
Topic 15A ARMS, GEMS, Negative Amortization, and Balloon Payments
1. You get a 25-year ARM of $95,000. The interest rate is 7.75% the first year, 8.75% the second year, and 9% the third year. Calculate the monthly payment for year 3.
A. $797.24 B. $816.30 C. $827.62 D. $794.86
2. You get a 9% $30,000 loan from your aunt to start an accounting business. You agree to repay $500 a month for 2 years while you get the business going and then to increase the monthly payment to $1,000. How many months (to the nearest hundredth) will it take to pay off the loan?
A. 25.10 months B. 49.10 months C. 41.88 months D. 65.88 months
3. 26.5 years ago Grady McGregor bought a home from Galina Stipanovich for $83,000. Grady paid $10,000 down and agreed to pay 10.5% interest with monthly payments of $600. Calculate the balance after payment 318.
A. $257,074.47 B. $11,122.78 C. $11,318.22 D. $139,274.47
4. You purchase a cabin lot for $30,000. You pay $4,000 down and agree to pay the balance to the seller at $750 each quarter, including 10% interest. You also agree to pay the seller whatever balance is owed at the end of 5 years. Calculate the total amount of the 20th payment (the balloon payment).
A. $23,445.52 B. $22,695.52 C. $24,195.52 D. $24,945.52
Topic 16A Selecting an Investment: The 8 Investment Criteria
1. An investor in rental property can eliminate management responsibilities by hiring a property management company. (T or F)
2. Which of the following investments has the greatest liquidity: 10 acres of vacant land, 100 shares of corporate stock, or a 48-unit apartment building?
A. 10 acres of vacant land
B. 100 shares of corporate stock
C. 48-unit apartment building
D. All 3 have the same degree of liquidity
3. With an equity-type investment, the value can go up or down. (T or F)
4. Gain from the sale of stocks and real estate may be taxed at lower rates. (T or F)
5. All investments provide positive cash flow during the investment period. (T or F)
6. You buy 100 shares of ABC stock. Shortly after you buy the stock, ABC invents a new product that should increase sales dramatically. As a result, the value of your stock should decrease. (T or F)
7. You buy some vacant land. Shortly after, interest rates skyrocket. As a result, the value of your land should increase. (T or F)
8. Jerry has $50,000 to invest. Jerry buys a 24-unit apartment building for $1,200,000 with $500,000 down, agreeing to pay the seller the remaining $1,150,000 at $10,000 per month. During the first year of ownership, Jerry collects a total of $197,200 in rents and has expenses totaling $45,300. Rents drop dramatically during the second year. Jerry collects a total of $138,200 and has expenses totaling $55,200. Calculate Jerry's cash flow for the first and second year.
A. Year 1 = $141,900; year 2 = $73,000
B. Year 1 = $73,000; year 2 = $141,900
C. Year 1 = $31,900; year 2 = negative $37,000
D. Year 1 = $31,900; year 2 = positive $37,000
9. You are thinking about investing in either (1) a CD that pays 6.75% compounded annually, or (2) a tax-free municipal bond that pays 5.5% compounded annually. Assuming that you are in a 15% tax bracket, the municipal bond provides the greater after-tax return. (T or F)
10. You are trying to decide between two investments: the first provides a return of 8.41% compounded quarterly; the second provides a return of 8.61% compounded annually. The second provides the greater return. (T or F)
11. You are thinking about buying some rental property for $525,000 with $125,000 down. You have projected your rents, vacancy rate, expenses, depreciation, etc. for a 5-year period. Your after-tax cash flows are: negative $1,344 (yr 1), negative $877 (yr 2), $475 (yr 3), $1,972 (yr 4), and $3,488 (yr 5). At the end of year 5, you project being able to sell the property for $650,000, with after-tax proceeds (after paying off the mortgage loan, selling expenses, and Uncle Sam on the gain) of $172,332. What is your projected after-tax rate of return?
A. 19.57% B. 7.27% C. 7.04% D. 5.86%
Topic 17A Buy or Lease a Car? Buy or Rent a Home?
1. You need a new car, and have found one you like. The dealer has given you two choices.
Choice 1: Buy the car for $28,000.
Choice 2: Lease the car for 3 years, in which case you must pay a deposit of $2,000. You then pay $500 at the beginning of each month for 3 years; you have the option to purchase the car for $17,200 at the end of 3 years (your $2,000 deposit will apply toward the purchase price, so you will pay the $15,200 difference).
If you lease the car, assume that you will purchase it at the end of 3 years for the $17,200 residual value. Assuming that money is worth 8%, and that you will use the car for personal use (there are no income tax advantages either way), what is the net present value of your lease expenditures?
A. $29,842.93 B. $30,422.17 C. $30,028.55 D. $27,711.36
2. One way to evaluate whether to buy a home or rent is to find the present value of the cash expenditures under each scenario. Which statement, below is false?
A. We should consider the federal income tax savings as a result of being able to deduct interest and property taxes instead of taking a standard deduction.
B. Assuming a certain holding period, we should figure that utilities and insurance will change over time.
C. Under the “own” scenario, because it is so subjective, we should figure the sales price of the home will be the same as the purchase price.
D. In some conditions, it might make more sense to rent than to buy.
Topic 17B Rent-to-Own Option
1. Sarah likes to freeze fruit and vegetables when they are in season, but she does not have a freezer to store them in. She found a new 10 cubic foot freezer at a rent-to-own store. Sarah can buy the freezer for $729.50 or she can use their rent-to-own program, in which she would make 15 monthly payments of $98.25, starting in one month. Sarah does not have the $729.50 so she is thinking about using the rent-to-own option. If she does, what interest rate will she be paying?
A. 10.43% B. 156.38% C. 125.10% D. 0.87%
Topic 17C Finding FV for a Series of Unequal Deposits
1. You win fourth place in the lottery. You will receive $10,000 today, $10,000 at the end of the first and second years, and $15,000 at the end of the third and fourth years. If you deposit all of the money in a savings plan earning 7.5% compounded annually, what will the savings plan balance be at the end of 4 years, after your final deposit? Round your answer to the nearest dollar.
A. $59,167 B. $60,660 C. $51,262 D. $68,459
2. You have the chance to buy a note on which you will receive 123 monthly payments of $375 (starting in one month) followed by 60 monthly payments of $475. If you invest all payments in a savings plan earning 9.5% compounded monthly, what will your savings plan balance be in 183 months? Round your final answer to the nearest dollar.
A. $37,985 B. $160,811 C. $36,714 D. $155,431
Topic 17D Capital Budgeting
1. Willie is thinking about buying a new machine. The machine costs $25,000 and will provide cash flow to his business as follows: $6,000 for each of the first 5 years and $4,000 for each of the following 2 years. In addition, the projected salvage value is $2,000 at the end of year 7. Calculate the rate of return Willie will earn on his investment. Assume that cash flows are realized at the end of each year.
A. 13.76% B. 13.62% C. -33.68% D. 8.57%
2. Willie is thinking about buying a new machine. The machine costs $25,000 and will provide cash flow to his business as follows: $6,000 for each of the first 5 years and $4,000 for each of the following 2 years. In addition, the projected salvage value is $2,000 at the end of year 7. Assume that cash flows are realized at the end of each year. Calculate the net present value of the investment, assuming a 12% discount rate.
A. $1,272.35 B. $15,030.52 C. $1,369.28 D. $13,988.73
Topic 17E Bonds With a Call Feature
1. You buy a $1,000 7¾ bond at 110⅝, immediately after the annual interest has been paid to the previous owner. If the bond is callable in exactly 15 years at 105, what is the YTC?
A. 7.75% B. 6.80% C. 6.87% D. 7.12%
Topic 17F Valuation of Common Stock
1. Find the theoretical value of a stock that you project will pay dividends of $1.20 per year, assuming you require a 9% rate of return.
A. $10.80 B. $13.33 C. $0.11 D. $11
2. Find the theoretical value of a stock. You project dividends a year from now will be $1.20, and will increase 6% per year. You require a 9% rate of return.
A. $40 B. $20 C. $0.07 D. $1.31
3. Find the theoretical value of a stock that should experience supernormal growth during the early stages. Assume there will be no dividends for the first 2 years, $0.25 for year 3, $0.40 for year 4, $0.50 for year 5, and $0.60 for year 6. Then, dividends will increase at 5% per year. You require a 10% return.
A. $1.11 B. $12.60 C. $7.11 D. $8.22
Topic 20A Gain on Sale of Depreciable Property
1. You purchased a duplex on September 18 for $180,000. Assume land constitutes 20% of the price. You use the 27.5-year MACRS depreciation table. You sell the property on October 1 of year 3 for $225,000 less $15,000 selling expenses. Calculate your gain from the sale.
A. $40,909 B. $41,127 C. $76,909 D. $77,127
2. You purchased a 7-year depreciable property for $1,200 on March 5. You sold it on December 28 of year 4 for $500. Calculate MACRS depreciation, to the nearest dollar, for year 4.
A. $150 B. $137 C. $144 D. $75
Topic 20B Depletion of Natural Resources
1. Zenith Coal Mining Company purchased a tract of land for $28,000,000. In addition, Zenith paid $1,640,000 to prepare the site for mining. After mining is completed, it is estimated that the property will be worth $1,500,000. Geologists estimate that the land contains 7,800,000 tons of coal. Zenith mined 823,700 tons of coal during year 1. Calculate depletion expense for the year.
A. $3.80 B. $3.59 C. $3,130,060 D. $2,957,083
Topic 22A Term or Whole Life? And Other Life Insurance Puzzles
1. Igor is trying to decide whether to get whole-life insurance (with an annual premium of $1,070) or 15-year term insurance (with an annual premium of $210). His insurance agent tells him that the cash value for the whole-life policy will be $21,300 in 15 years. Calculate the rate Igor earns on the savings plan portion. Use two decimal places in your answer.
A. 6.81% B. 3.46% C. 3.92% D. 6.04%
2. Assume your annual life insurance premium is $1,440. You elect to pay monthly, using a premium factor of 9%. What is your APR?
A. 1.20% B. 14.45% C. 1.43% D. 17.18%
Topic 23A Pythagorean Formula
1. A right triangle has a base of 30 in. and height of 20 in. Calculate the perimeter.
A. 36.06 in. B. 86.06 in. C. 300 in. D. 50 in.
2. You are getting ready to install the concrete floor for a building. The building is to be 36 ft wide, and 48 ft deep. In order to make the corners square you decide to use the Pythagorean formula. Determine the diagonal distance so that the corners will be square.
A. 84 ft B. 56 ft C. 60 ft D. 64 ft
Topic 23B Measurement Calculations in Graphic Design
1. Which measurement is greater?
A. 1 7/16 in. B. 1 1/2 in. C. 1 5/8 in. D. 1 9/16 in.
2. What is the decimal equivalent of 13/16?
A. .1316 B. .81 C. .813 D. .8125
3. You want to divide a page that is 6 1/4 inches wide into four equal sections. What should the width of each section be section be?
A. 1 9/16 in. B. 1 5/6 in. C. 1 1/2 in. D. 1 7/16 in.
4. You have an image that is 4 inches wide by 6 inches high. You want to create a space for the image that is 5 inches wide. How much height should be reserved for the image?
A. 7.25 in. B. 7.5 in. C. 7 in. D. 9 in.
5. A photograph is 4 1/8 inches wide by 3 inches high. You want the width to be 7 1/2 inches. Approximately how high will the new photo be?
A. 5.4545 in. B. 6.375 in. C. 5.2762 in. D. 6.2885 in.
6. Find the percentage reduction/enlargement for a photo measuring 2 1/4 inches wide that you want to appear 1 5/8 inches wide.
A. 138.46% B. 73.83% C. 135.44% D. 72.22%
7. A photo measures 5 inches wide by 3 inches high. If you want to enlarge the photo so that the new photo is 150% the size of the old photo, what should the new width be?
A. 6.5 in. B. 7.5 in. C. 4.5 in. D. 7.25 in.
8. A 12 point line of type would be about how high?
A. 1.2 inches B. 12 inches C. .12 inches D. 12/72 in.
9. A pica is approximately 1/6 of an inch. (T or F)
10. You have selected a typeface for a manuscript that has 2.86 CPP and will use 12 points of leading. You will use a space of 20 picas wide by 24 picas high. What is the approximate CPL?
A. 57.20 CPL B. 22.86 CPL C. 6.99 CPL D. .14 CPL
11. You have selected a typeface for a manuscript that has 2.86 CPP and will use 12 points of leading. You will use a space of 20 picas wide by 24 picas high. Approximately how many lines of text can you get?
A. 57 lines B. 288 lines C. 24 lines D. 22 lines
12. You have 4 full pages of existing manuscript with an average CPL of 60 and 27 lines of type per page. What is the approximate TMC?
A. 1,620 B. 348 C. 6,480 D. 5,700
Topic 24A Medical Dosages
1. An infant weighs 18 pounds. What is the equivalent weight in kg?
A. 180 kg B. 39.6 kg C. 20.2 kg D. 8.18 kg
2. A doctor prescribes an antibiotic for a child: 20 mg/kg/day in 4 doses. The child weighs 15 kg. What is the amount of each dosage?
A. 75 mg B. 5 mg C. 300 mg D. 100 mg
3. A doctor prescribes 150 mg of a medication. Each tablet contains 50 mg. How many tablets should the patient be given?
A. 50 B. 100 C. 3 D. 4
4. A doctor prescribes 150 mg of a medication to be taken orally once a day. The patient wants to take the medication in liquid form. The liquid has a strength of 37.5 mg of the drug per mλ. How many mλ does the patient need?
A. 4 mλ B. .25 mλ C. 112.5 mλ D. 187.5 mλ
5. A doctor’s order reads “Infuse 200 mλ over 8 h.” For what flow rate should an electronic infusion device be programmed?
A. 200 mλl/h B. 8 mλ/h C. 50 mλ/h D. 25 mλ/h
6. Calculate the IV flow rate for a manually regulated infusion device assuming that 600 mλ of solution is to be infused over 4 hours. The drop factor is 20 gtt/mλ.
A. 150 drops/minute B. 7.5 drops/minute C. 50 drops/min D. 40 drops/min
Topic 25A Normal Curve
1. ABC Company makes bolts. The mean diameter is 1.30 cm with a standard deviation of 0.01 cm. What percent of the bolts should be expected to have a diameter between 1.28 cm and 1.32 cm?
A. 95.4% B. 47.7% C. 99.8% D. 50%
2. A fast food restaurant sells "quarter-pounders." A machine prepares the hamburger patties. The average (mean) weight is 4.1 ounces, with a standard deviation of 0.1 ounce. What percent of the patties should weigh at least 4 ounces?
A. 95.4% B. 47.7% C. 99.8% D. 84.1%
3. A fast food restaurant sells "quarter-pounders." A machine prepares the hamburger patties. The average (mean) weight is 4.1 ounces, with a standard deviation of 0.1 ounce. The company does a random test on 100 patties and finds that 5 weigh less than 3.8 ounces. This indicates that the machine needs adjustment. (T or F)
Topic 25B Linear Regression
1. Consider a class of 10 students. The students share data to determine whether there is a relationship between GPA and the number of hours of TV watching. Hours of TV watching is the independent variable. (T or F)
2. Consider a class of 10 students. The students share data to determine whether there is a relationship between GPA and the number of hours of TV watching. Here is the data:
| | | | | | | | | | | |
|Student: |1 |2 |3 |4 |5 |6 |7 |8 |9 |10 |
| | | | | | | | | | | |
|GPA for the semester |3.68 |3.18 |2.45 |3.85 |2.88 |2.40 |2.00 |3.15 |3.60 |2.85 |
Use special calculator registers to estimate the GPA of a student who watches 12 hours of TV per week.
A. 2.88 B. 2.85 C. 2.82 D. 2.79
3. Consider a class of 10 students. The students share data to determine whether there is a relationship between GPA and the number of hours of TV watching. Here is the data:
| | | | | | | | | | | |
|Student: |1 |2 |3 |4 |5 |6 |7 |8 |9 |10 |
| | | | | | | | | | | |
|GPA for the semester |3.68 |3.18 |2.45 |3.85 |2.88 |2.40 |2.00 |3.15 |3.60 |2.85 |
Write an equation that describes the relationship between hours of TV watching (x) and GPA (y). Use four decimal places for both m and b.
A. y = 3.4476 - .0794x
B. y = .0794 - 3.4448x
C. y = 3.8182 - .0806x
D. y = .0806 - 3.8182x
4. Consider a class of 10 students. The students share data to determine whether there is a relationship between GPA and the number of hours of TV watching. Here is the data:
| | | | | | | | | | | |
|Student: |1 |2 |3 |4 |5 |6 |7 |8 |9 |10 |
| | | | | | | | | | | |
|GPA for the semester |3.68 |3.18 |2.45 |3.85 |2.88 |2.40 |2.00 |3.15 |3.60 |2.85 |
Calculate the correlation coefficient.
A. +12.00 B. -0.98 C. +0.98 D. -0.14
5. For a particular linear forecasting problem, the dependent variable increases as the independent variable increases. The historical data is very close to the regression line. Which of these correlation coefficients best match the situation?
A. +0.95 B. 0.1 C. -0.1 D. -0.95
6. For a particular linear forecasting problem, the dependent variable decreases as the independent variable increases. The historical data is highly scattered about the regression line. Which of these correlation coefficients best match the situation?
A. +0.95 B. 0.1 C. -0.1 D. -0.95
7. What conclusions are certain about a correlation coefficient of -0.95?
A. The dependent variable is decreasing rapidly with an increase in the independent variable.
B. The dependent variable cannot be predicted with any degree of certainty.
C. The dependent variable is decreasing and can be predicted with a high degree of certainty.
D. The dependent variable is decreasing and cannot be predicted with any certainty.
8. Average home values in a certain city for the previous 5 years are: $85,500 (yr 1), $87,400 (yr 2), $92,300 (yr 3), $95,800 (yr 4), and $98,100 (yr 5). Use linear forecasting to estimate the average value for the next year (yr 6).
A. $101,300 B. $102,300 C. $102,500 D. $101,900
Topic 25C Calculating the Probability of Something Happening
1. A bag contains 7 red marbles, 4 yellow marbles, and 3 blue marble. If you randomly select 1 marble, what is the probability that the marble is yellow?
A. [pic] B. [pic] C. [pic] D. 25%
2. You draw a card at random from a standard deck of 52 cards. What is the probability that you draw the ace of hearts ( A♥ )?
A. [pic] B. [pic] C. [pic] D. [pic]
3. You toss a fair coin four times. What is the probability that you toss tails all four times?
A. [pic] B. [pic] C. [pic] D. [pic]
4. You draw four cards at random from a standard deck of 52 cards. What is the probability that you draw 4 aces?
A. [pic] B. [pic] C. [pic] D. [pic]
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A. 1,176 sq ft
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