Question 1

Compounding interest daily is seldom used in comparison to compounding once a year.

Accepted Answer

A) True 
 B)False

Question 2

The rate used in calculating compound interest is found by:

Accepted Answer

A)  Annual rate * number of periods 
B)  Annual rate * number of times compounded per year 
C)  Annual rate divided by number of times compounded per year 
D)  Annual rate divided semiannually 
E)  None of these 
A)  Annual rate * number of periods 
B)  Annual rate * number of times compounded per year 
C)  Annual rate divided by number of times compounded per year 
D)  Annual rate divided semiannually 
E)  None of these

Question 3

Jim Ryan deposited $8,000 at National Bank at 6% interest compounded quarterly. What was the effective rate (APY)? (Round to the nearest hundredth percent.)

Accepted Answer

The answer of Jim Ryan deposited $8,000 at National Bank...

Question 4

The factor for compounding $4,000 at 9% compounded annually for one year is 1.0900.

Accepted Answer

A) True 
 B)False

Question 5

Check your answer by use of the financial calculator.

Accepted Answer

N=16 L/ Y=

Question 6

Compounding always requires the use of tables.

Accepted Answer

A) True 
 B)False

Question 7

Jim Moore opens a new savings account. He deposits $12,000 at 12% compounded semiannually. At the start of the fourth year, Jim deposits an additional $50,000 that is also compounded semiannually at 12%. At the end of six years, the balance in Jim Moore's account is

Accepted Answer

A)  $66,081.20 
B)  $50,000.00 
C)  $16,081.20 
D)  $88,555.42 
E)  None of these 
A)  $66,081.20 
B)  $50,000.00 
C)  $16,081.20 
D)  $88,555.42 
E)  None of these

Question 8

Don Williams wants to buy a boat five years from today. He will need $40,000. Don wants you to calculate how much he needs today to put in the bank (10% compounded semiannually) to reach his goal in the future.

Accepted Answer

The answer of Don Williams wants to buy a boat...

Question 9

Interest calculated on a balance every three months is said to be compounded quarterly.

Accepted Answer

A) True 
 B)False

Question 10

The rate on a $4,000, 12% investment compounded quarterly for four years is 4%.

Accepted Answer

A) True 
 B)False

Question 11

The number of periods on $5,000 at 12% compounded semiannually for 10 years is 10 periods.

Accepted Answer

A) True 
 B)False

Question 12

Present value does not:

Accepted Answer

A)  Know future amount 
B)  Know the present dollar amount 
C)  Find present dollar amount 
D)  Use tables 
E)  None of these 
A)  Know future amount 
B)  Know the present dollar amount 
C)  Find present dollar amount 
D)  Use tables 
E)  None of these

Question 13

The present value is also less than the future value.

Accepted Answer

A) True 
 B)False

Question 14

Anne Katz, the owner of Katz Sport Shop, lends $8,000 to Shelley Slater to help her open an art shop. Shelley plans to repay Anne at the end of eight years with interest compounded semiannually at 8%. At the end of eight years, Anne will receive

Accepted Answer

A)  $14,983.85 
B)  $16,857 
C)  $16,587 
D)  $14,484 
E)  None of these 
A)  $14,983.85 
B)  $16,857 
C)  $16,587 
D)  $14,484 
E)  None of these

Question 15

Al Derover wants to buy a used jeep in five years. He estimates the cost will be $12,000. If he invests $8,500 now at a rate of 10% compounded semiannually, will he have enough money to buy the jeep at the end of five years? Show your work.

Accepted Answer

He will have $13,845

Question 16

Gracie Shay wants to buy a new Hummer in five years. Gracie estimates the cost of the Hummer will be $28,000. If she invests $12,000 now at a rate of 6% compounded semiannually, she:

Accepted Answer

A)  Will have enough money 
B)  Will have exactly $16,000 
C)  Will have $18,000 
D)  Will not have enough money 
E)  None of these 
A)  Will have enough money 
B)  Will have exactly $16,000 
C)  Will have $18,000 
D)  Will not have enough money 
E)  None of these

Question 17

Compound value = $ amount divided by
.

Accepted Answer

A) True 
 B)False

Question 18

The number of periods is equal to:

Accepted Answer

A)  Number of years divided by rate 
B)  Number of years * rate 
C)  Number of years * number of times compounded per year 
D)  Number of years divided by number of times compounded per year 
E)  None of these 
A)  Number of years divided by rate 
B)  Number of years * rate 
C)  Number of years * number of times compounded per year 
D)  Number of years divided by number of times compounded per year 
E)  None of these

Question 19

Paul Lospennato wants to buy a house. Five years from now, he will need $90,000. Paul wants you to calculate how much he needs today to put in the bank (10% compounded semiannually) to reach his goal in the future.

Accepted Answer

The answer of Paul Lospennato wants to buy a house....

Question 20

Moxie Fox deposited $30,000 in a savings account at 6% interest compounded semiannually. At the beginning of year 4, Moxie deposits an additional $60,000 at 6% interest compounded semiannually. At the end of six years, what is the balance in Moxie's account?

Accepted Answer

The answer of Moxie Fox deposited $30,000 in a savings...

Exam 19: Compound Interest and Present Value

Compounding interest daily is seldom used in comparison to compounding once a year.

The rate used in calculating compound interest is found by:

Jim Ryan deposited $8,000 at National Bank at 6% interest compounded quarterly. What was the effective rate (APY)? (Round to the nearest hundredth percent.)

The factor for compounding $4,000 at 9% compounded annually for one year is 1.0900.

Check your answer by use of the financial calculator.

Compounding always requires the use of tables.

Jim Moore opens a new savings account. He deposits $12,000 at 12% compounded semiannually. At the start of the fourth year, Jim deposits an additional $50,000 that is also compounded semiannually at 12%. At the end of six years, the balance in Jim Moore's account is

Don Williams wants to buy a boat five years from today. He will need $40,000. Don wants you to calculate how much he needs today to put in the bank (10% compounded semiannually) to reach his goal in the future.

Interest calculated on a balance every three months is said to be compounded quarterly.

The rate on a $4,000, 12% investment compounded quarterly for four years is 4%.

The number of periods on $5,000 at 12% compounded semiannually for 10 years is 10 periods.

Present value does not:

The present value is also less than the future value.

Anne Katz, the owner of Katz Sport Shop, lends $8,000 to Shelley Slater to help her open an art shop. Shelley plans to repay Anne at the end of eight years with interest compounded semiannually at 8%. At the end of eight years, Anne will receive

Al Derover wants to buy a used jeep in five years. He estimates the cost will be $12,000. If he invests $8,500 now at a rate of 10% compounded semiannually, will he have enough money to buy the jeep at the end of five years? Show your work.

Gracie Shay wants to buy a new Hummer in five years. Gracie estimates the cost of the Hummer will be $28,000. If she invests $12,000 now at a rate of 6% compounded semiannually, she:

Compound value = $ amount divided by .

The number of periods is equal to:

Paul Lospennato wants to buy a house. Five years from now, he will need $90,000. Paul wants you to calculate how much he needs today to put in the bank (10% compounded semiannually) to reach his goal in the future.

Moxie Fox deposited $30,000 in a savings account at 6% interest compounded semiannually. At the beginning of year 4, Moxie deposits an additional $60,000 at 6% interest compounded semiannually. At the end of six years, what is the balance in Moxie's account?

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