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FIN 370T ASSIGNMENT Week 2 Practice: Week 2 Knowledge Check
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Materials
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MC Qu. 4-16 What is the future value of…
What is the future value of $1,000 deposited for one year earning 5 percent interest rate annually?
Multiple Choice
$1,005
$1,000
$2,050
$1,050
MC Qu. 4-5 We call the process of earning…
We call the process of earning interest on both the original deposit and on the earlier interest payments
Multiple Choice
discounting.
computing.
multiplying.
compounding.
MC Qu. 4-71 A deposit of $500 earns 5…
A deposit of $500 earns 5 percent the first year, 6 percent the second year, and 7 percent the third year. What would be the third year future value?
Multiple Choice
$595.46
$634.91
$671.02
$615.62
MC Qu. 4-9 With regard to money deposited in…
With regard to money deposited in a bank, future values are
Multiple Choice
smaller than present values.
are completely independent of present values.
equal to present values.
larger than present values.
MC Qu. 4-17 What is the future value of…
What is the future value of $2,000 deposited for one year earning 6 percent interest rate annually?
Multiple Choice
$4,120
$2.000
$120
$2,120
MC Qu. 4-10 A dollar paid (or received) in…
A dollar paid (or received) in the future is
Multiple Choice
not comparable to a dollar paid (or received) today.
worth as much as a dollar paid (or received) today.
worth more than a dollar paid (or received) today.
not worth as much as a dollar paid (or received) today.
MC Qu. 4-29 Approximately how many years does it…
Approximately how many years does it take to double a $300 investment when interest rates are 8 percent per year?
Multiple Choice
9 years
11 years
4.17 years
0.11 years
MC Qu. 4-7 The interest rate, i, which we…
The interest rate, i, which we use to calculate present value, is often referred to as the
Multiple Choice
compound rate.
dividend.
multiplier.
discount rate.
MC Qu. 4-73 What is the present value of…
What is the present value of a $600 payment in one year when the discount rate is 8 percent?
Multiple Choice
$525.87
$575.09
$555.56
$498.61
MC Qu. 4-78 Approximately what rate is needed to…
Approximately what rate is needed to double an investment over five years?
Multiple Choice
12.2 percent
8 percent
15.8 percent
14.4 percent
MC Qu. 4-79 Determine the interest rate earned on…
Determine the interest rate earned on an $800 deposit when $808 is paid back in one year.
Multiple Choice
100 percent
15 percent
10 percent
1 percent
MC Qu. 4-109 You double your money in 5…
You double your money in five years. The reason your return is not 20 percent per year is because:
Multiple Choice
it is probably a “fad” investment.
it does not reflect the effect of the Rule of 72.
it does not reflect the effect of compounding.
it does not reflect the effect of discounting.
MC Qu. 5-146 Which of the following will increase…
Which of the following will increase the future value of an annuity?
Multiple Choice
The number of periods increases.
The amount of the annuity increases.
The interest rate increases.
All of these choices are .
MC Qu. 5-22 What is the future value of…
What is the future value of a $1,000 annuity payment over 4 years if the interest rates are 8 percent?
Multiple Choice
$4,506.11
$9,214.20
$4,320.00
$3,312.10
MC Qu. 5-74 If the present value of an…
If the present value of an ordinary, 8-year annuity is $12,500 and interest rates are 9.1 percent, what is the present value of the same annuity due?
Multiple Choice
$14,114.80
$14,211.90
$13,941.90
$13,637.50
MC Qu. 5-147 Which of the following will increase…
Which of the following will increase the present value of an annuity?
Multiple Choice
The effective rate is calculated over fewer years.
The amortization schedule decreases.
The interest rate decreases.
The number of periods decreases.
MC Qu. 5-30 If the future value of an…
If the future value of an ordinary, 7-year annuity is $10,000 and interest rates are 4 percent, what is the future value of the same annuity due?
Multiple Choice
$10,700.00
$10,000.00
$10,400.00
$9,615.38
MC Qu. 5-31 If the future value of an…
If the future value of an ordinary, 4-year annuity is $1,000 and interest rates are 6 percent, what is the future value of the same annuity due?
Multiple Choice
$943.40
$1,000.00
$1,040.00
$1,060.00
MC Qu. 5-33 A loan is offered with monthly…
A loan is offered with monthly payments and a 6.5 percent APR. What is the loan’s effective annual rate (EAR)?
Multiple Choice
5.69 percent
12.63 percent
7.28 percent
6.697 percent
MC Qu. 5-15 People refinance their home…
People refinance their home mortgages
Multiple Choice
when rates fall and rise.
whenever they need to, independent of rates.
when rates fall.
when rates rise.
