# BUSI 352 Quiz 4 Answers Liberty University | Complete Answers

BUSI 352 Quiz 4 Answers Liberty University

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Question 1 In five years, Joe wants to buy a boat that costs \$75,000 in today’s dollars. He can earn 8% return on his investments, and he expects the boat to increase in price by 3% each year. What will Joe’s serial payment at the end of the second year be, if he wants to buy the boat in 5 years?

Question 2 Claire just won the lottery and has been told that she can either accept annual payments at the beginning of each year of \$173,695 per year for the next 20 years or she can receive a lump­sum settlement. Claire figures she could invest the money at 6.34% (the same rate as the annuity). What would the amount of the lump­sum settlement be?

Question 4 Cindy won the California lottery. She can take a single lump­sum payout of \$12.5 million dollars or receive \$825,000 per year for the next 25 years. What rate of return would Cindy need to break even if she took the lump­sum amount instead of the annuity?

Question 5 Steve and his wife, Christine, recently opened an investment account with the intention of saving enough to purchase a house. Their goal is to have \$45,000 for a down payment in 5 years. Their account will guarantee them a return of 8% compounded annually. How much do they need to put into the account right now to reach their goal?

Question 6 Tan and Chia are contemplating making a contribution to their grandchildren’s education fund. They are both retired, have a significant amount of discretionary income, and are concerned about estate transfer taxes. Which of the following education planning techniques would you recommend?

Question 7 Kim and Nick are planning to save for their daughter Chloe’s college education. Chloe was born today and will attend college for 4 years, starting at age 18. Tuition currently costs \$15,000 per year, and tuition inflation is expected to be 6%. They believe they can earn 9% on their investments. How much must Kim and Nick save at the end of each year if they want to make their last savings payment at the beginning of Chloe’s first year of college?

Question 8 Mitch and Jennifer have AGI of \$125,000 and have not planned for their children’s education. Their children are ages 17 and 18, and the parents anticipate paying \$20,000 per year, per child for education expenses. Which of the following is the most appropriate recommendation to pay for the children’s education?

Question 10 Frank and Stephanie have an 18­year­old son who is going to college this year for four years. The tuition is \$15,000 per year and is expected to increase at 4% per year. They believe they can earn 6% per year on their investment; what lump­sum amount must they deposit today to pay for their son’s education?

Question 13 David purchased stock 15 years ago for \$325.75. He sold the stock today for \$2,500. Given this information, what is the average annual compound rate of return that David realized on this stock?

Question 15 Bobby bought a house for \$275,000, by putting 15% down and borrowing the balance. His note is for 30 years at 7.5% interest. If his first payment is due August 1st of the current year, how much interest will he pay this year?