Multiple choice

1. If the present value annuity factor for 10 years at 10% interest rate is 6.1446, what is the present value annuity factor for an equivalent annuity due?  

a. 6.1446 

b. 7.38 

c. 6.759 

d. None of the above 

2. If the present annuity factor is 3.8896, what is the present value annuity factor for an 

equivalent annuity due if the interest rate is 9%?  

a. 3.5684 

b. 4.2397 

c. 3.8896 

d. None of the above 

3. For $10,000 you can purchase a 5-year annuity that will pay $2358.65 per year for five years. The payments are made at the beginning of each year. Calculate the effective annual interest rate implied by this arrangement: (approximately)  

a. 8% 

b. 9% 

c. 10% 

d. None of the above 

4. John House has taken a $250,000 mortgage on his house at an interest rate of 6% per year. If the mortgage calls for twenty equal annual payments, what is the amount of each payment?  

a. $21,796.14 

b. $10,500.00 

c. $16,882.43 

d. None of the above