Question 1

Which of the following are rules for computing finance charges on open installment loans:
actuarial method, average daily balance method, rule of 78s, United States rule, banker's
rule, unpaid balance method?

Accepted Answer

The answer of Which of the following are rules for...

Question 2

When the Scott Pearson Company's stock increased in value from $100.00 per share to
$125.00 per share, the company reported to its shareholders that their stocks had increased
in value by 25%. The stock price remained fixed at $125 for a few months, but then it fell
back down to $100.00 per share. At that time, the Scott Pearson Company reported to the
shareholders that the stock had decreased by 20%. Since the price increase and decrease are
exactly the same, should not the percent increase and the percent decrease be equal?
Explain.

Accepted Answer

The answer of When the Scott Pearson Company's stock increased...

Question 3

A borrower uses an income tax refund to make a partial payment on a personal
simple-interest loan. Which rules or methods can be used to compute the new balance?

Accepted Answer

The answer of A borrower uses an income tax refund...

Question 4

In your own words, describe and compare the unpaid balance method and the average
daily balance method.

Accepted Answer

The answer of In your own words, describe and compare...

Question 5

Solve the problem.
-Find the final value, after all taxes are paid, for the following retirement account. Assume that taxes are deferred and that deposits are made at the end of each year. Marginal tax rate: $\quad 10 \%$
Regular deferred contribution: $\$ 1000$
Annual rate of return: $\quad 5 \%$
Number of years: 30

Accepted Answer

The final value of the retirement account can be calculated using the future value of an annuity formula: $FV = P \times \frac{(1 + r)^n - 1}{r}$, where $P$ is the annual payment, $r$ is the annual rate of return, and $n$ is the number of years. Here, $P = \$1000$, $r = 5\% = 0.05$, and $n = 30$. So, $FV = \$1000 \times \frac{(1 + 0.05)^{30} - 1}{0.05} = \$66,438.96$. After taxes are applied, the final value is $FV \times (1 - \text{tax rate}) = \$66,438.96 \times (1 - 0.10) = \$59,794.96$.

Question 6

Assume that the given mutual fund investment earns monthly returns that are reinvested and subsequently earn at the
same rate. Find the beginning value of the investment, first monthly return, or effective annual rate of return as indicated.
-$$\begin{array} { c l c } 
\hline & \text { Number of } & \text { Monthly } \
\text { Beginning } & \text { Shares } & \text { Percentage } \
\text { NAV } & \text { Purchased } & \text { Return } \
\hline \$ 11.00 & 332 & 2.77 \% \
\hline
\end{array}$$ Find the annual rate of return.

Accepted Answer

The effective annual rate of return can be calculated using the formula: $(1 + \text{monthly return})^{12} - 1$. Here, the monthly return is 2.77% or 0.0277. Thus, the annual rate is $(1 + 0.0277)^{12} - 1 \approx 0.388$ or 38.8%.

Question 7

Jesse invests $1000 for 2 years in an investment that bears 8% interest compounded
annually. On the same day that Jesse invests his money, Shirley invests $1000 in a simple
interest account with an interest rate of 8%. On the date of maturity, Shirley re-invests her
money, including the interest, for a second year. Without using calculations, explain which
person, if either, has made the more profitable investment.

Accepted Answer

The answer of Jesse invests $1000 for 2 years in...

Question 8

Which of the following rules, methods, or formulas might require you to use an APR table: actuarial method, average daily balance method, banker's rule, compound interest formula, percent change formula, rule of 78s, simple interest formula, United States rule, unpaid balance method.

Accepted Answer

The answer of Which of the following rules, methods, or...

Question 9

Assume that the given mutual fund investment earns monthly returns that are reinvested and subsequently earn at the
same rate. Find the beginning value of the investment, first monthly return, or effective annual rate of return as indicated.
-$$\begin{array} { l l l } 
\hline & \text { Number of } & \text { Monthly } \
\text { Beginning } & \text { Shares } & \text { Percentage } \
\text { NAV } & \text { Purchased } & \text { Return } \
\hline \$ 8.02 & 246 & 1.76 \% \
\hline
\end{array}$$ Find the first monthly return.

Accepted Answer

The first monthly return can be calculated by multiplying the beginning NAV ($8.02) by the number of shares purchased (246) and then applying the monthly percentage return (1.76%). First, find the total investment value: $8.02 * 246 = $1972.92. Then, calculate the return: $1972.92 * 0.0176 = $34.72.

Question 10

What is the meaning of "unearned" interest?

Accepted Answer

The answer of What is the meaning of "unearned" interest?...

Question 11

For what type of computation are the actuarial method and the rule of 78s used? Which
technique requires the use of an APR table?

Accepted Answer

The answer of For what type of computation are the...

Question 12

Solve the problem.
-Find the future value (to the nearest dollar)of the following inflation-adjusted retirement account. Deposits are made at the end of each year. Annual inflation rate: $1 \%$
Initial deposit: $\quad \$ 2500$
Annual rate of return: $5 \%$
Number of years: 20

Accepted Answer

The answer of Solve the problem.
-Find the future value (to...

Question 13

In a Ponzi scheme, where Ponzi promised investors a 50% profit within 45 days or a 100% profit within 90 days, how many investors would be required by the end of two and a quarter years with
The same promised return?

Accepted Answer

A Ponzi scheme pays returns to its investors from the new capital paid to the operators by new investors, rather than from profit earned. In this scenario, to maintain the promised return of 100% profit within 90 days (or a quarter of a year), the scheme would need to double the amount of money invested every quarter. Over two and a quarter years (which equals 9 quarters), the money would need to double 9 times. Starting with a base of 1 (representing the initial investment), doubling 9 times is 2^9, which equals 512. However, since the question asks for the number of investors, not the total amount of investment, and assuming each investor contributes an equal share, the number of investors required would also follow this pattern. Thus, starting with 1 investor, to sustain the scheme for 9 quarters, you would need 2^9 investors, which equals 512. However, the correct calculation for the number of additional investors needed over the initial one to reach this total is 2^9 - 1, which equals 511 additional investors to the initial one, making the total count incorrect as per the provided options. The correct approach to answering the question directly from the options provided seems to have been misunderstood in the explanation. The focus should be on the total count as per the doubling pattern, which was initially calculated as 512, directly matching an option, but the explanation veered off. The correct interpretation should be straightforward: to sustain the scheme for 9 quarters, doubling the investment each quarter, you'd nominally need a total that doubles each quarter, leading to a misunderstanding in the explanation provided. The correct answer based on the options given and the initial doubling explanation should indeed be 512, but due to a misinterpretation in the explanation phase. The essence is that each quarter, the scheme requires double the previous total to pay out the promised returns, not specifically doubling the number of investors unless starting from one. The explanation mistakenly conflated the total amount needed with the number of investors directly, which in the context of the question's options, should align with the pattern of doubling per quarter, leading to a direct match with one of the provided choices without subtracting one.

Question 14

Under what circumstances is the Average Daily Balance method a more favorable method
to the borrower than the Unpaid Balance method? Explain.

Accepted Answer

The answer of Under what circumstances is the Average Daily...

Question 15

Consider the first four levels of a pyramid scheme where "each one recruits six." a)If you are the top person in the chart, and each person's entry fee is $1, how much money will you receive and
What will your profit be? b)What is the total number of members from level 1 through level 4?

Accepted Answer

Each level recruits six times the previous level. Level 1 has 6 members, level 2 has 36, level 3 has 216, and level 4 has 1296. Total members from level 1 to 4 is 6 + 36 + 216 + 1296 = 1554. The top person receives $1 from each member, totaling $216 from levels 1 to 3. The profit is $215 after subtracting the initial $1 entry fee.

Question 16

Solve the problem.
-Find the final value, after all taxes are paid, for the following retirement account. Assume that taxes are not deferred and that deposits are made at the end of each year. $\begin{array} { l c } \text { Marginal tax rate: } & 28 \% \ \text { Regular deferred contribution: } & \$ 2500 \ \text { Annual rate of return: } & 5 \% \end{array}$
$\begin{array} { l c } \text { Annual rate of return: } & 5 \% \ \text { Number of years: } & 10 \end{array}$

Accepted Answer

The correct answer is A because the final value after all taxes are paid is $21,214.36. This is calculated by taking the regular deferred contribution of $2500 and multiplying it by the annual rate of return of 5% for 10 years. The result is $27,500. This is then multiplied by the marginal tax rate of 28%, which results in $7,685. This is then subtracted from the $27,500 to get the final value of $21,214.36.

Question 17

Consider a pyramid scheme where "each one recruits six." 
a.How many members are in the second and third levels? 
b.In general, how many members are in level N?

Accepted Answer

In a pyramid scheme where each person recruits six, the second level has 6 members (each one recruits six, so the first person recruits 6 people). The third level has $6 \times 6 = 36$ members because each of the 6 recruits another 6. For level N, the total number of members up to that level is $6 + 6^2 + 6^3 + \ldots + 6^{N-1}$, which is a geometric series. However, the question asks for the number of members in level N specifically, which is $6^{N-1}$, because the first level is considered $6^0 = 1$ (the initial recruiter), and so the second level is $6^1 = 6$, the third is $6^2 = 36$, and so on.

Question 18

A borrower uses an income tax refund to pay off the balance on a fixed installment loan.
Which rules or methods can be used to compute the amount of interest he will save?

Accepted Answer

The answer of A borrower uses an income tax refund...

Question 19

Consider a Ponzi scheme where investors are promised 100% profit per quarter and at the beginning of each quarter (90 days), 1000 investors contribute $1000 each, and all monies stay in
Until the end of the year. Suppose that at the end of the year, 10% of investors actually invest
Another $2000 rather than taking out profit. Now what amount stays with the operator going into
The second year?

Accepted Answer

The answer of Consider a Ponzi scheme where investors are...

Question 20

Assume that the given mutual fund investment earns monthly returns that are reinvested and subsequently earn at the
same rate. Find the beginning value of the investment, first monthly return, or effective annual rate of return as indicated.
- Find the annual rate of return.

Accepted Answer

The answer of Assume that the given mutual fund investment...

Quiz 13: Personal Financial Management

Which of the following are rules for computing finance charges on open installment loans: actuarial method, average daily balance method, rule of 78s, United States rule, banker's rule, unpaid balance method?

A borrower uses an income tax refund to make a partial payment on a personal simple-interest loan. Which rules or methods can be used to compute the new balance?

In your own words, describe and compare the unpaid balance method and the average daily balance method.

Which of the following rules, methods, or formulas might require you to use an APR table: actuarial method, average daily balance method, banker's rule, compound interest formula, percent change formula, rule of 78s, simple interest formula, United States rule, unpaid balance method.

What is the meaning of "unearned" interest?

For what type of computation are the actuarial method and the rule of 78s used? Which technique requires the use of an APR table?

Solve the problem. -Find the future value (to the nearest dollar) of the following inflation-adjusted retirement account. Deposits are made at the end of each year. Annual inflation rate: $1 \%$ Initial deposit: $\quad \$ 2500$ Annual rate of return: $5 \%$ Number of years: 20

In a Ponzi scheme, where Ponzi promised investors a 50% profit within 45 days or a 100% profit within 90 days, how many investors would be required by the end of two and a quarter years with The same promised return?

Under what circumstances is the Average Daily Balance method a more favorable method to the borrower than the Unpaid Balance method? Explain.

Consider the first four levels of a pyramid scheme where "each one recruits six." a) If you are the top person in the chart, and each person's entry fee is $1, how much money will you receive and What will your profit be? b) What is the total number of members from level 1 through level 4?

Consider a pyramid scheme where "each one recruits six." a.How many members are in the second and third levels? b.In general, how many members are in level N?

A borrower uses an income tax refund to pay off the balance on a fixed installment loan. Which rules or methods can be used to compute the amount of interest he will save?

Assume that the given mutual fund investment earns monthly returns that are reinvested and subsequently earn at the same rate. Find the beginning value of the investment, first monthly return, or effective annual rate of return as indicated. - Find the annual rate of return.

Quiz 13: Personal Financial Management

Which of the following are rules for computing finance charges on open installment loans: actuarial method, average daily balance method, rule of 78s, United States rule, banker's rule, unpaid balance method?

A borrower uses an income tax refund to make a partial payment on a personal simple-interest loan. Which rules or methods can be used to compute the new balance?

In your own words, describe and compare the unpaid balance method and the average daily balance method.

Which of the following rules, methods, or formulas might require you to use an APR table: actuarial method, average daily balance method, banker's rule, compound interest formula, percent change formula, rule of 78s, simple interest formula, United States rule, unpaid balance method.

What is the meaning of "unearned" interest?

For what type of computation are the actuarial method and the rule of 78s used? Which technique requires the use of an APR table?

Solve the problem. -Find the future value (to the nearest dollar) of the following inflation-adjusted retirement account. Deposits are made at the end of each year. Annual inflation rate: 1%1 \%1% Initial deposit: $2500\quad \$ 2500$2500 Annual rate of return: 5%5 \%5% Number of years: 20

In a Ponzi scheme, where Ponzi promised investors a 50% profit within 45 days or a 100% profit within 90 days, how many investors would be required by the end of two and a quarter years with The same promised return?

Under what circumstances is the Average Daily Balance method a more favorable method to the borrower than the Unpaid Balance method? Explain.

Consider the first four levels of a pyramid scheme where "each one recruits six." a) If you are the top person in the chart, and each person's entry fee is $1, how much money will you receive and What will your profit be? b) What is the total number of members from level 1 through level 4?

Consider a pyramid scheme where "each one recruits six." a.How many members are in the second and third levels? b.In general, how many members are in level N?

A borrower uses an income tax refund to pay off the balance on a fixed installment loan. Which rules or methods can be used to compute the amount of interest he will save?

Assume that the given mutual fund investment earns monthly returns that are reinvested and subsequently earn at the same rate. Find the beginning value of the investment, first monthly return, or effective annual rate of return as indicated. - Find the annual rate of return.

Solve the problem. -Find the future value (to the nearest dollar) of the following inflation-adjusted retirement account. Deposits are made at the end of each year. Annual inflation rate: $1 \%$ Initial deposit: $\quad \$ 2500$ Annual rate of return: $5 \%$ Number of years: 20