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Travis invests $5,500 today into a retirement account.He expects to earn 9.2 percent,compounded annually,on his money for the next 13 years.After that,he wants to be more conservative,so only expects to earn 6 percent,compounded annually.How much money will he have in his account when he retires 25 years from now,assuming this is the only deposit he makes into the account?


A) $29,411.20
B) $34,747.80
C) $34,616.56
D) $41,919.67
E) $42,003.12

F) None of the above
G) B) and D)

Correct Answer

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Today,you deposit $2,500 in a bank account that pays 3.6 percent simple interest.How much interest will you earn over the next 5 years?


A) $90.00
B) $120.00
C) $450.00
D) $483.59
E) $492.27

F) A) and B)
G) A) and C)

Correct Answer

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Lisa has $1,000 in cash today.Which one of the following investment options is most apt to double her money?


A) 6 percent interest for 3 years
B) 12 percent interest for 5 years
C) 7 percent interest for 9 years
D) 8 percent interest for 9 years
E) 6 percent interest for 10 years

F) B) and E)
G) C) and D)

Correct Answer

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All else held constant,the future value of a lump sum investment will decrease if the:  


A) amount of the lump sum investment increases.
B) time period is increased.
C) interest is left in the investment.
D) interest rate increases.
E) interest is changed to simple interest from compound interest.

F) D) and E)
G) B) and C)

Correct Answer

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Western Bank pays 5 percent simple interest on its savings account balances,whereas Eastern Bank pays 5 percent compounded annually.If you deposited $6,000in each bank,how much more money would you earn from the Eastern Bank account at the end of 3 years?


A) $55.84
B) $45.75
C) $60.47
D) $40.09
E) $50.14

F) None of the above
G) B) and E)

Correct Answer

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You want to have $40,000 for a down payment on a house 4 years from now.If you can earn 5.6 percent,compounded annually on your savings,how much do you need to deposit today to reach your goal?


A) $32,166.54
B) $34,420.73
C) $27,880.69
D) $28,211.17
E) $30,886.40

F) All of the above
G) D) and E)

Correct Answer

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When you were born,your parents opened an investment account in your name and deposited $1,500 into the account.The account has earned an average annual rate of return of 5.3percent.Today,the account is valued at $42,856.How old are you?


A) 71.47 years
B) 70.67 years
C) 61.08 years
D) 67.33 years
E) 64.91 years

F) A) and B)
G) A) and C)

Correct Answer

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Which one of the following will increase the present value of a lump sum future amount to be received in 15 years?


A) An increase in the time period
B) An increase in the interest rate
C) A decrease in the future value
D) A decrease in the interest rate
E) Changing to compound interest from simple interest

F) A) and E)
G) All of the above

Correct Answer

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Your coin collection contains ten 1949 silver dollars.If your grandparents purchased the coins for their face value when they were new,how much will your collection be worth when you retire in 2065,assuming the coins appreciate at an annual rate of 5.1 percent?


A) $3,440.63
B) $2,329.29
C) $3,348.98
D) $3,205.64
E) $2,644.29

F) A) and B)
G) None of the above

Correct Answer

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At 10 percent interest,how long does it take to triple your money?


A) 14.33 years
B) 11.53 years
C) 9.67 years
D) 10.36 years
E) 10.56 years

F) A) and E)
G) A) and D)

Correct Answer

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Isaac only has $1,090 today but needs $1,979 to buy a new computer.How long will he have to wait to buy the computer if he earns 5.4 percent compounded annually on his savings? Assume the price of the computer remains constant.


A) 11.83 years
B) 11.48 years
C) 12.51 years
D) 12.77 years
E) 11.34 years

F) B) and E)
G) A) and E)

Correct Answer

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Lucas expects to receive a sales bonus of $7,500 one year from now.The process of determining how much that bonus is worth today is called:


A) aggregating.
B) discounting.
C) simplifying.
D) compounding.
E) extrapolating.

F) A) and B)
G) A) and E)

Correct Answer

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Marcos is investing $5 today at 7 percent interest so he can have $35 later.This $35 is referred to as the:


A) true value.
B) future value.
C) present value.
D) discounted value.
E) complex value.

F) C) and E)
G) A) and B)

Correct Answer

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Your grandparents just gave you a gift of $6,500.You are investing this money for 6 years at 4 percent simple interest.How much money will you have at the end of the 6 years?


A) $6,760
B) $7,280
C) $7,800
D) $8,060
E) $6,938

F) None of the above
G) A) and D)

Correct Answer

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Which one of the following is the correct formula for computing the present value of $600 to be received in 6 years? The discount rate is 7 percent.


A) PV = $600 (1 + .06) 7
B) PV = $600 (1 + .07) 6
C) PV = $600 × (.07 ×6)
D) PV = $600/(1 + .07) 6
E) PV = $600/(1 + 6) 07

F) B) and D)
G) A) and D)

Correct Answer

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Jessica invested $2,000 today in an investment that pays 6.5 percent annual interest.Which one of the following statements is correct,assuming all interest is reinvested?


A) She will earn the same amount of interest each year.
B) She could have the same future value and invest less than $2,000 initially if she could earn more than 6.5 percent interest.
C) She will earn an increasing amount of interest each and every year even if she should decide to withdraw the interest annually rather than reinvesting the interest.
D) Her interest for Year 2 will be equal to $2,000×.065 ×2.
E) She will be earning simple interest.

F) A) and E)
G) B) and D)

Correct Answer

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The interest rate used to compute the present value of a future cash flow is called the:


A) prime rate.
B) current rate.
C) discount rate.
D) compound rate.
E) simple rate.

F) All of the above
G) A) and C)

Correct Answer

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Kevin just deposited $13,000 into his savings account at Traditions Bank.The bank will pay .87 percent interest,compounded annually,on this account.How much interest on interest will he earn over the next 5 years?


A) $8.67
B) $9.93
C) $8.92
D) $9.49
E) $9.73

F) C) and E)
G) A) and B)

Correct Answer

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You're trying to save to buy a new car valued at $48,690.You have $38,000 today that can be invested at your bank.The bank pays 3.7 percent annual interest on its accounts.How long will it be before you have enough to buy the car for cash? Assume the price of the car remains constant.


A) 5.13 years
B) 9.29 years
C) 4.67 years
D) 7.08 years
E) 6.82 years

F) A) and B)
G) B) and E)

Correct Answer

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Which one of the following is the correct formula for the current value of $600 invested today at 5 percent interest for 6 years?


A) PV = $600/ [(1 + .06) ×5]
B) PV = $600/ [(1 +.05) ×6]
C) PV = $600/ (.06×5)
D) PV = $600/ (1 + .05) 6
E) PV = $600/ (1 + .06) 5

F) B) and E)
G) D) and E)

Correct Answer

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