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| 1 | |
Compounding looks into the present when we know what we have in the future. |
| | A) | True |
| | B) | False |
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| 2 | |
The number of periods in compounding is found by multiplying number of years times the number of times compounded per year. |
| | A) | True |
| | B) | False |
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| 3 | |
Compound value = $ amount divided by table factor. |
| | A) | True |
| | B) | False |
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| 4 | |
The rate for table look-up on a $4,000, 12 percent investment compounded quarterly for 4 years is 4 percent. |
| | A) | True |
| | B) | False |
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| 5 | |
A table factor of .7513 from a present value table means that if $.75 is invested at a certain rate of interest for a certain number of periods it would be worth $1 in the past. |
| | A) | True |
| | B) | False |
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| 6 | |
In tables for calculating compound interest the number of periods is equal to: |
| | A) | Number of years divided by rate |
| | B) | Number of years x rate |
| | C) | Number of years x number of times compounded per year |
| | D) | Number of years divided by number of times compounded per year |
| | E) | None of the above |
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| 7 | |
By using the table in handbook, the value of $60 deposited in a bank for six years at a rate of 10 percent compounded annually is: |
| | A) | $96.63 |
| | B) | $96.36 |
| | C) | $106.30 |
| | D) | $106.03 |
| | E) | None of the above |
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| 8 | |
The effective rate (APY) is: |
| | A) | The nominal rate |
| | B) | The stated rate |
| | C) | True semiannual rate |
| | D) | True annual rate |
| | E) | None of the above |
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| 9 | |
Present value does not: |
| | A) | Know future amount |
| | B) | Know the present dollar amount |
| | C) | Find present dollar amount |
| | D) | Use tables |
| | E) | None of the above |
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| 10 | |
By using the table in the handbook, the present value of $9,000 for seven years compounded at 10 percent semiannually is: |
| | A) | $4,618.80 |
| | B) | $17,819.10 |
| | C) | $4,545.90 |
| | D) | $4,186.60 |
| | E) | None of the above |
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| 11 | |
$10,000 for 12 years compounded at 12 percent quarterly results in how many periods? |
| | A) | 12 |
| | B) | 24 |
| | C) | 36 |
| | D) | 48 |
| | E) | None of the above |
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| 12 | |
Bill Smith deposits $15,800 into National Bank which pays 10 percent interest that is compounded semiannually. By using the table in the handbook, what will Bill have in this account at the end of 4 years? |
| | A) | $23,344.50 |
| | B) | $23,132.78 |
| | C) | $19,204.90 |
| | D) | $23,433.05 |
| | E) | None of the above |
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| 13 | |
Margaret Foster wants to buy a new camper in 4 years. Margaret estimates the cost of the camper will be $12,000. If she invests $7,900 now, at a rate of 12 percent compounded semiannually, she: |
| | A) | Will not have enough money |
| | B) | Will have exactly $12,000 |
| | C) | Will have $12,500 |
| | D) | Will have $12,591.02 |
| | E) | None of the above |
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| 14 | |
Earl Miller deposited $25,000 at Y Bank at an interest rate of 12 percent compounded quarterly. (Use the tables in the handbook). The effective rate (APY) is: |
| | A) | 12 percent |
| | B) | 12.55 percent |
| | C) | 12.15 percent |
| | D) | 13.2 percent |
| | E) | None of the above |
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| 15 | |
Ray Long wants to retire in Arizona when he is 75 years of age. Ray, who is now 60, believes he will need $200,000 to retire comfortably. To date, he has set aside no retirement money. If he gets an interest of 12 percent compounded semiannually, he will have to invest today: (Use the tables in the handbook) |
| | A) | $26,020 |
| | B) | $34,820 |
| | C) | $82,000 |
| | D) | $91,000 |
| | E) | None of the above |
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