Question

1. One year ago, XYZ deposited $5,400 in an account that has earned and will earn 12.3% per year in compound interest. If PQR deposits $8,700 in an account in 3 years from today that earns simple interest, then how much simple interest per year must PQR earn to have the same amount of money in 7 years from today as XYZ will have in 7 years from today? Answer as an annual rate.

A. A rate less than 6.00% or a rate equal to or greater than 18.00%

B. A rate equal to or greater than 6.00% but less than 9.00%

C. A rate equal to or greater than 9.00% but less than 12.00%

D. A rate equal to or greater than 12.00% but less than 15.00%

E. A rate equal to or greater than 15.00% but less than 18.00%

2. Bob has an investment worth $80,000. The investment will make a special, extra payment of X to Bob in 3 years from today. The investment also will make regular, fixed annual payments of $12,400 to PQR with the first of these payments made to Bob later today and the last of these annual payments made to Bob in 4 years from today. The expected return for the investment is 8.5 percent per year. What is X, the amount of the special payment that will be made to Bob in 3 years?

A. An amount less than $20,000 or an amount equal to or greater than $41,000

B. An amount equal to or greater than $20,000 but less than $25,000

C. An amount equal to or greater than $25,000 but less than $30,000

D. An amount equal to or greater than $30,000 but less than $35,000

E. An amount equal to or greater than $35,000 but less than $41,000

Answer 1