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Key Quiz 8.5
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1
Complete the sentence: "Doubling the interest rate or term of an investment…"
A)"…has no effect on the amount of interest paid."
B)"…increases the amount of interest paid, but the increase is less than double."
C)"…doubles the amount of interest paid."
D)"…more than doubles the amount of interest paid.
2
Complete the sentence: "Increasing the frequency of compounding of interest ___________________ the future value of an investment or loan."
A)"…has no effect on…"
B)"…decreases…"
C)"…increases…"
D)"…more than doubles…"
3
Complete the sentence: "Increasing the frequency of compounding of interest ___________________ the present value of an investment or loan."
A)"…has no effect on…"
B)"…decreases…"
C)"…increases…"
D)"…reduces by one-half…"
4
You deposit $5000 in an investment account for four years at 8%. How much more would you earn if interest were compounded monthly instead of annually?
A)$75.89
B)$6802.44
C)$6878.33
D)$13 680.80
5
You need to take out a loan for $10 000. How much more interest would you have to pay at 3.75% compounded monthly over 5 years rather than 4% compounded annually for 4 years?
A)$330.29
B)$360.19
C)$1716.59
D)$2058.78





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