25. On August 31, 2004, Ashe Corp. adopted a plan to accumulate
$1,000,000 by September 1, 2008. Ashe plans to make four equal
annual deposits to a fund that will earn interest at 10% compounded
annually. Ashe will make the first deposit on September 1, 2004.
Future value and future amount factors are as follows: Which one of
the following would be the amount of annual deposits Ashe should
make (rounded)?
26. Which one of the following sets of interest (or discount) rates will
give the greater present value of $1.00 and greater future value of
$1.00?
27. On November 1, 2005, a company purchased a new machine that
it does not have to pay for until November 1, 2007. The total payment
on November 1, 2007 will include both principal and interest.
Assuming interest at a 10% rate, the cost of the machine would be the
total payment multiplied by what time value of money concept?
28. A corporation obtains a loan of $200,000 at an annual rate of
12%. The corporation must keep a compensating balance of 20% of
any amount borrowed on deposit at the bank, but it normally does not
have a cash balance account with the bank. What is the effective cost
of the loan?
29. A company has an outstanding one-year bank loan of $500,000 at
a stated interest rate of 8%. The company is required to maintain a
20% compensating balance in its checking account. The company
would maintain a zero balance in this account if the requirement did
not exist. What is the effective interest rate of the loan?
30. Josey maintained a $10,000 balance in his savings account
throughout 2008, the first year of the account. The savings account
paid 2% interest compounded annually. For 2008, the inflation rate
was 3%. For 2008, what is Josey's real interest rate on the savings
account?