True truethe more frequent the compounding periods year
C) original amount invested.
D) both A and B.
Answer: B) $1,604
You just purchased a parcel of land for $10,000. If you expect a 12% annual rate of return on your investment, how much will you sell the land for in 10 years?
Answer: C) $71
If you put $700 in a savings account with a 10% nominal rate of interest compounded monthly, what will the investment be worth in 21 months (round to the nearest dollar)?
Answer: B) $635
Which of the following formulas represents the future value of $500 invested at 8% compounded quarterly for five years?
Answer: D) 500(1 + .02)20
What is the value of $750 invested at 7.5% compounded quarterly for 4.5 years (round to the nearest $1)?
Answer: C) 77 months
If you want to have $10,000 in 10 years, which of the following formulas represents how much money you must put in a savings account today? Assume that the savings account pays 6% and it is compounded monthly.
Answer: B) 10,000/(1 + .005)120
Dawn Swift discovered that 20 years ago, the average tuition for one year at an Ivy League school was $4,500. Today, the average cost is $29,000. What is the growth rate in tuition cost over this 20-year period? Round off to the nearest 0.1%.
Answer: A) $1,120
If you want to have $90 in four years, how much money must you put in a savings account today? Assume that the savings account pays 8.5% and it is compounded monthly (round to the nearest $1).
Answer: B) $191
If you want to have $1,200 in 27 months, how much money must you put in a savings account today? Assume that the savings account pays 14% and it is compounded monthly (round to the nearest $10).
Answer: D) $3,148
What will the dollar amount be if the interest is compounded semiannually for those four years?
Answer: C) 21
You bought a painting 10 years ago as an investment. You originally paid $85,000 for it. If you sold it for $484,050, what was your annual return on investment?
Answer: D) $6,720
Middletown, USA currently has a population of 1.5 million people. It has been one of the fastest growing cities in the nation, growing by an average of 4% per year for the last five years. If this city's population continues to grow at 4% per year, what will the population be 10 years from now?
Answer: D) 13 years
The future value of $200 deposited today in an account for four years paying semiannual interest when the annual interest rate is 12% is:
B) decreases as the compound rate increases.
C) increases as the number of compound periods decreases.
A) $500. B) $630. C) $700. D) $620.
Answer: B) $630.
A) $1,025,000 B) $954,719 C) $2,525,548 D) $4,085,920 E) $3,489,097
Answer: E) $3,489,097
A) 9 years B) 8 years C) 12 years D) 4 years E) 6 years
Answer: A) 9 years
Determining the specified amount of money that you will receive at the maturity of an investment is an example of a future value equation TRUE/FALSE
Answer: TRUE
The present value of a single future sum:
A) increases as the number of discount periods increases.
Assuming two investments have equal lives, a high discount rate tends to favor:
A) the investment with large cash flow early.
Discounting is the opposite of:
A) compounding. B) future value. C) opportunity costs. D) both A and C.
C) the number of periods
D) both A and C E) all of the above
What is the present value of $12,500 to be received 10 years from today? Assume a discount rate of 8% compounded annually and round to the nearest $10.
A) $5,790 B) $11,574 C) $9,210 D) $17,010
If you want to have $875 in 32 months, how much money must you put in a savings account today? Assume that the savings account pays 16% and it is compounded monthly (round to the nearest $10).
A) $630 B) $570 C) $650 D) $660
C) P/(1 + c)n
D) P(1 + c)n
C) the investment is compounded at a higher interest rate.
D) both B & C.
C) 10 periods at 4%.
D) 80 periods at 2%.
C) Approximately six years
D) Approximately eight years
Bobby's grandmother deposited $100 in a savings account for him when he was born. The money has been earning an annual rate of 12% interest, compounded quarterly for the last 25 years. He is getting married and would like to take his new bride on a fabulous honeymoon. How much does he have in this account to use?
A) $4,165
What is the present value of the following uneven stream of cash flows? Assume a 6% discount rate and end-of-period payments. Round to the nearest whole dollar.
Year Cash Flow
B) PV = $3,000[1.06]1 + $4,000[1.06]2 + $5,000[1.06]3
C) PV = $3,000/[1.06]0 + $4,000/[1.06]1 + $5,000/[1.06]2
B) $248.40.
C) $313.60.
B) $784.
C) $614.
B) $675.30
C) $775.40
B) decreases as the discount rate decreases.
C) increases as the number of discount periods increases.
Answer: FALSE
As the compound interest rate increases, the present value of future cash flows decreases TRUE/FALSE
Answer: TRUE
Which of the following provides the greatest annual interest?
Answer: A) 10% compounded annually
The effective annual rate increases when the ________ increases.
E) all of the above
Answer: D) both A and C
D) 6.1%
Answer: D) 6.1%
C) 10.38%
D) 10.125%
C) effective annual rate.
D) all of the above.
Answer: FALSE
The annual percentage yield is equal to the nominal rate of interest TRUE/FALSE
