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1. An engineer received a bonus of $12,000 that he will invest now.

He wants to calculate the equivalent value after 24


years, when he plans to use all the resulting money as the down payment on an island vacation home. Assume a
rate of return of 8% per year for each of the 24 years. Find the amount he can pay down.
A) $76,904 B) $67,094 C) $76,094 D) $67,904
2. How much money must an electrical contractor deposit every year in her savings account starting 1 year from now
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at 5 2% per year in order to accumulate $6000 seven years from now?
A) $4214 B) $725 C) $529 D) $315
3. When you take your first job, you decide to start saving right away for your retirement. You put $5,000 per year into
the company’s retirement plan, which averages 8% interest per year. Five years later, you move to another job and
start anew retirement plan. You never get around to merging the funds in the two plans. If the first plan continued
to earn interest at the rate of 8% per year for 35years after you stopped making contributions, how much is the
account worth?
A) $29,333 B) $33,239 C) $343,967 D) $433,697
4. Ashea Smith is a 22-year-old senior who used the Stafford loan program to borrow $4,000 four years ago when the
interest rate was 4.06% per year. $5,000 was borrowed three years ago at 3.42%. Two years ago she borrowed
$6,000 at 5.23%, and last year $7,000 was borrowed at 6.03% per year. Now she would like to consolidate her debt
into a single 20-year loan with a 5% fixed annual interest rate . If Ashea makes annual payments (starting in one
year) to repay her total debt, what is the amount of each payment?
A) $1,980 per year B) $24,689 per year C) $23,285 per year D) 22,000 per year
5. Stan Moneymaker has a bank loan for $10,000 to pay for his new truck. This loan is to be repaid in equal end-of-
month installments for five years with a nominal interest rate of 12% compounded monthly. What is the amount of
each payment?
A) $111 B) $222 C) $333 D) $444
6. Certain operating savings are expected to be 0 at the end of the first six months, to be $1,000 at the end of the
second six months, and to increase by $1,000 at the end of each six-month period thereafter, for a total of four
years. It is desired to find the equivalent uniform amount, A, at the end of each of the eight six-month periods if the
nominal interest rate is 20% compounded semiannually.
A) $3,004 B) $4,003 C) $2,003 D) $3,400
7. You have $10,000 to invest for two years. Your bank offers 5% interest, compounded continuously for funds in a
money market account. Assuming no additional deposits or withdrawals, how much money will be in that account at
the end of two years?
A) $15,052 B) $10,052 C) $11,052 D) $12,052
8. Suppose that one has a present loan of $1,000 and desires to determine what equivalent uniform EOY payments, A,
could be obtained from it for 10 years if the nominal interest rate is 20% compounded continuously.
A) $288 B) $128 C) $ 384 D) $256.
9. The cash flow diagram below has an internal rate of return of 35%. What is the value of Y if perpetual service is
assumed?

A) $2,997,500 B) $1,049,125 C) $500,000 D) None of these


10. The Highway Department expects the cost of maintenance for a piece of heavy construction equipment to be $5000
in year 1, to be $5500 in year 2, and to increase annually by $500 through year 10. At an interest rate of 10% per
year, determine the present worth of 10 years of maintenance costs.
A) $42,170 B) $41,270 C) $44,130 D) &88,230
11. In problems that involve an arithmetic gradient wherein the payment period is longer than the compounding period,
the interest rate to use in the equations
A) can be any effective rate, as long as the time units on i and n are the same.
B) must be the interest rate that is exactly as stated in the problem.
C) must be an effective interest rate that is expressed over a 1-year period.
D) must be the effective interest rate that is expressed over the time period equal to the time where the first A value
occurs.
12. An environmental testing company needs to purchase $40,000 worth of equipment 2 years from now. At an interest
rate of 20% per year compounded quarterly, the present worth of the equipment is closest to
A) $27,070. B) $27,800. C) $26,450. D) $28,220. 3.63
13. When the variable cost is reduced for linear total cost and revenue lines, the breakeven point decreases. This is an
economic advantage because
A) the revenue per unit will increase.
B) the two lines will now cross at zero.
C) the profit will increase for the same revenue per unit.
D) the total cost line becomes nonlinear.
14. Fixed costs for manufacturing a certain product are $25,000 per year. Variable costs are $5 per unit. The product can
be purchased from another manufacturer for a flat rate of $10 per unit. The number of units that must be used each
year in order for the manufacture and purchase alternatives to breakeven is closest to:
A) 2,000 units B) 3,000 units C) 4,000 units D) 5,000 units
15. Fixed costs for a small import company are $500,000 per year. Its primary imported item sells at a revenue of $30
per unit and has variable costs of $1.20 per unit. The number of units the company must sell each year to breakeven
is closest to:
A) 11,500 B) 14,400 C) 17,400 D) 21,600
16. Standard straight line depreciation of a $100,000 asset takes place over a 7-year recovery period. If the salvage value
is 20% of first cost, the book value at the end of 3 years is closest to
A) $57,140. B) $65,715. C) $11,430. D) $80,000.
17. If straight line and double declining balance depreciation rates for n=5 years are calculated and compared, the rates
(in percent) for the second year are
A)20% and 40%. B) 40% and 24%. C) 20% and 24%. D) 20% and 16%.
18. A piece of machinery costs $5,000 and has an anticipated $1,000 resale value at the end of its five- year useful life.
Compute the depreciation schedule for the machinery by the sum-of-years-digits method. What is the depreciation
in the 3rd year?
A) $1067 B) $533 C) $800 D) $267
19. A new machine costs $12,000 and has a $1,200 salvage value after using it for eight years. Compute the
depreciation in the 8th year.
A) $534 B) $401 C) $712 D) $1,266
20. Thick Trunk Sawmill purchases a new automated log planer for $95,000. The asset is depreciated using straight-line
depreciation over a useful life of 10 years to a salvage value of $5,000. The book value at the end of year six is
nearest to
A) $9,000 B) $38,000 C) $41,000 D) $54,000