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all questions need to be answered within time frame. Specify the correct optionQuestion 110 pts
1. You plan to have a family retreat at a cost of \$75,000. You found a CD that pays an
interest rate of 9% per year, compounding monthly.
(a) How much do you need to put in the CD account today, if the retreat takes place in 5
years?
\$47900
\$45200
\$41120
\$42890
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Question 210 pts
(b) If you can only come up with \$40000 today, in how many years can you have the
family retreat?
8 years
7 years
6 years
9 years
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Question 310 pts
2. You are interested in buying a car at \$25,000, and plan to finance the entire amount.
(a) If you expect to pay off the loan at \$31000 in 5 years, what nominal annual interest
rate, compounding monthly, will make this happen?
2.25%/year
4.30%/year
3.75%/year
4.83%/year
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Question 410 pts
(b)
If you can secure a loan at 3%/year, compounding monthly, and still be willing to
pay it off at \$31,000, how long will the loan be?
6.9 years
7.8 years
7.2 years
8.3 years
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Question 510 pts
3. Company A has fixed expenses of \$11,500 per year and each unit of product has a
\$0.25 variable cost. Company B has fixed expenses of \$6,300 per year and can
produce the same product at a \$0.50 variable cost per unit.
(a) At what number of units of annual production will Company A have the same
overall cost as Company B?
30100
20800
33000
31700
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Question 610 pts
(b) At 40,000 units per year, by how much is cost of Company B higher than that of
company A?
\$4800
\$2400
\$7200
-\$2400
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Question 710 pts
4 (20 points). Five years ago, when the relevant cost index was 150, an industrial A/C
unit with a capacity of cooling a 25000-ft2 area cost \$45,000. Today, it is desired to build
a new A/C unit with capacity of cooling a 70000-ft2 area, and the cost index now is 370.
Assume that the power-sizing exponent to reflect economies of scale, x, is 0.7. Use the
cost-index and power-sizing models to determine the approximate cost (expressed in
today’s dollars) of the new A/C unit.
(a) Today, the cost of building an A/C unit with capacity of cooling a 25000-ft2 area is
\$111,000
\$117,000
\$122,000
\$107,000
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Question 810 pts
(b) Today, the cost of building an A/C unit with capacity of cooling a 75000-ft2 area is
\$227,450
\$239,500
\$257,022
\$248,700
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Question 910 pts
5. \$80,000 is deposited in a bank account that pays 9% nominal interest per year.
(a)
How long does it take for the account to reach \$240000, if interest compounds
quarterly?
13.5 years
11.5 years
14.5 years
12.5 years
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Question 1010 pts
(b)
How long does it take for the account to reach \$400,000, if interest compounds
monthly?
19 years
17 years
16 years
18 years

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