Question 1

Juanita Finn deposits $12,000 into Valley Bank, which pays interest of 8% compounded annually for four years. How much will Juanita have in her account?

Accepted Answer

$12,000 ×

Question 2

Earl Miller deposited $25,000 at Y Bank at an interest rate of 12% compounded quarterly. (Use the tables in the handbook.)The effective rate (APY)is: (round to the nearest hundredth percent, if applicable)

Accepted Answer

A) 12% 
B) 12.55% 
C) 12.15% 
D) 13.2% 
E) None of these 
A) 12% 
B) 12.55% 
C) 12.15% 
D) 13.2% 
E) None of these

Question 3

Katie Hector wants to purchase a condo in Oxford, MS, in 20 years. The cost of the condo is expected to be $180,000. Assuming she can earn 6% annually, what should Katie deposit today?

Accepted Answer

A) $126,900 
B) $56,124 
C) $89,400 
D) $180,000 
E) None of these 
A) $126,900 
B) $56,124 
C) $89,400 
D) $180,000 
E) None of these

Question 4

Solve by compound table. Find future value.
 $$\begin{array} { | l | l | l | l | l | } 
\hline \text { Principal } & \text { Rate } & \text { Time } & \text { \#times Compounded per year } & \text { Future Value } \
\hline 12,000 & 10 \% & \text { 2 years } & \text { Semiannually } & \text { ? }\
\hline 
\end{array}$$

Accepted Answer

The answer of Solve by compound table. Find future value.
...

Question 5

Compounding always reduces the principal.

Accepted Answer

A) True 
 B)False

Question 6

In the table of present value of one dollar, all table factors are less than $1.

Accepted Answer

A) True 
 B)False

Question 7

Complete without using tables. (Show work.)
 $$\begin{array} { | l | l | l | l | l | l | l | } 
\hline \text { Principal } & \text { Time } & \begin{array} { l } 
\text { Rate of } \
\text { Compound }
\end{array} & \begin{array} { l } 
\text { When } \
\text { Compounded }
\end{array} & \begin{array} { l } 
\text { \# of Periods to be } \
\text { Compounded }
\end{array} & \begin{array} { l } 
\text { Total } \
\text { Amount }
\end{array} & \begin{array} { l } 
\text { Total } \
\text { Interest }
\end{array} \
\hline \$ 300 & 1 \text { year } & 6 \% & \text { Quarterly } & \text { A } & \text { B } & \text { C } \
\hline
\end{array}$$

Accepted Answer

A. 4; B. $

Question 8

Match the following terms with their definitions.
-Monthly

Accepted Answer

A) Year times number of times compounded in one year 
B) Twice a year 
C) Stated rate 
D) True rate of interest 
E) Amount calculated on adjusted principal
F)Periodically interest is calculated and added to principal
G)Rate divided by number of times compounded per year
H)Know future amount looking for present
I)Four times per year
J)Twelve times per year 
A) Year times number of times compounded in one year 
B) Twice a year 
C) Stated rate 
D) True rate of interest 
E) Amount calculated on adjusted principal
F)Periodically interest is calculated and added to principal
G)Rate divided by number of times compounded per year
H)Know future amount looking for present
I)Four times per year
J)Twelve times per year

Question 9

Using the table in the handbook, the present value of $12,000 for six years compounded at 6% semiannually is:

Accepted Answer

A) $12,814.08 
B) $8,461.08 
C) $8,416.80 
D) $8,614.80 
E) None of these 
A) $12,814.08 
B) $8,461.08 
C) $8,416.80 
D) $8,614.80 
E) None of these

Question 10

The effective rate (APY)is:

Accepted Answer

A) The nominal rate 
B) The stated rate 
C) The true semiannual rate 
D) The true annual rate 
E) None of these 
A) The nominal rate 
B) The stated rate 
C) The true semiannual rate 
D) The true annual rate 
E) None of these

Question 11

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 (use the tables in the handbook):

Accepted Answer

A) $14,984 
B) $16,857 
C) $16,587 
D) $14,484 
E) None of these 
A) $14,984 
B) $16,857 
C) $16,587 
D) $14,484 
E) None of these

Question 12

Interest on $2,630 at 3% compounded semiannually for five years is:

Accepted Answer

A) $304.90 
B) $414.49 
C) $511.96 
D) $422.12 
E) None of these 
A) $304.90 
B) $414.49 
C) $511.96 
D) $422.12 
E) None of these

Question 13

Mark Larken promised his grandson Ralph that he would give him $3,000 six years from today for graduating from high school. If money is worth 10% compounded semiannually, what is the present value of this money?

Accepted Answer

10% / 2 = 5%, 6 × 2

Question 14

Compounding always requires the use of tables.

Accepted Answer

A) True 
 B)False

Question 15

Compounding:

Accepted Answer

A) Calculates interest periodically 
B) Looks into the present when the future is known 
C) Is done only on an annual basis 
D) Results in less interest than simple interest 
E) None of these 
A) Calculates interest periodically 
B) Looks into the present when the future is known 
C) Is done only on an annual basis 
D) Results in less interest than simple interest 
E) None of these

Question 16

Use the present value table to complete:
 $\begin{array}{|l|l|l|l|l|l|l|}
\hline \begin{array}{l}
\text { Future } \
\text { Amount }
\end{array} & \text { Length of } & \text { Rate } & \text { Table } & \text { Rate } & \text { P.V. } & \text { P.V. } \
\text { Desired } & \text { Time } & \text { Compounded } & \text { Period } & \text { Used } & \text { Factor } & \text { Amount } \
\hline \$ 9,000 & 20 \mathrm{yrs} & \begin{array}{l}
10 \% \
\text { semiannually }
\end{array} & \text { A } & \text { B } & \text { C } & \text { D } \
\hline
\end{array}$

Accepted Answer

A. 40 peri

Question 17

Solve by using compound table. Find future value.
 $$\begin{array} { | l | l | l | l | l | } 
\hline\text { Principal } & \text { Rate } & \text { Time } & \text { \#times Compounded per year } & \text { Future Value } \
\hline \$ 3,000 & 8 \% & \text { 3 years } & \text { Quarterly } & \text { ? } \
\hline
\end{array}$$

Accepted Answer

The answer of Solve by using compound table. Find future...

Question 18

A compound table factor of 1.2950 means that $1 at a certain rate of interest for a certain period of time will increase in value to approximately $1.30.

Accepted Answer

A) True 
 B)False

Question 19

Match the following terms with their definitions.
-Compound

Accepted Answer

A) Year times number of times compounded in one year 
B) Twice a year 
C) Stated rate 
D) True rate of interest 
E) Amount calculated on adjusted principal
F)Periodically interest is calculated and added to principal
G)Rate divided by number of times compounded per year
H)Know future amount looking for present
I)Four times per year
J)Twelve times per year 
A) Year times number of times compounded in one year 
B) Twice a year 
C) Stated rate 
D) True rate of interest 
E) Amount calculated on adjusted principal
F)Periodically interest is calculated and added to principal
G)Rate divided by number of times compounded per year
H)Know future amount looking for present
I)Four times per year
J)Twelve times per year

Question 20

The number of periods in compounding is found by multiplying the number of years times the number of times compounded per year.

Accepted Answer

A) True 
 B)False

Exam 12: Compound Interest and Present Value

Juanita Finn deposits $12,000 into Valley Bank, which pays interest of 8% compounded annually for four years. How much will Juanita have in her account?

Earl Miller deposited $25,000 at Y Bank at an interest rate of 12% compounded quarterly. (Use the tables in the handbook.)The effective rate (APY)is: (round to the nearest hundredth percent, if applicable)

Katie Hector wants to purchase a condo in Oxford, MS, in 20 years. The cost of the condo is expected to be $180,000. Assuming she can earn 6% annually, what should Katie deposit today?

Solve by compound table. Find future value. Principal Rate Time \#times Compounded per year Future Value 12,000 10\% 2 years Semiannually ?

Compounding always reduces the principal.

In the table of present value of one dollar, all table factors are less than $1.

Complete without using tables. (Show work.) Principal Time Rate of Compound When Compounded \# of Periods to be Compounded Total Amount Total Interest \ 300 1 year 6\% Quarterly A B C

Match the following terms with their definitions. -Monthly

Using the table in the handbook, the present value of $12,000 for six years compounded at 6% semiannually is:

The effective rate (APY)is:

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 (use the tables in the handbook):

Interest on $2,630 at 3% compounded semiannually for five years is:

Mark Larken promised his grandson Ralph that he would give him $3,000 six years from today for graduating from high school. If money is worth 10% compounded semiannually, what is the present value of this money?

Compounding always requires the use of tables.

Compounding:

Use the present value table to complete: Future Amount Length of Rate Table Rate P.V. P.V. Desired Time Compounded Period Used Factor Amount \ 9,000 20 10\% semiannually A B C D

Solve by using compound table. Find future value. Principal Rate Time \#times Compounded per year Future Value \ 3,000 8\% 3 years Quarterly ?

A compound table factor of 1.2950 means that $1 at a certain rate of interest for a certain period of time will increase in value to approximately $1.30.

Match the following terms with their definitions. -Compound

The number of periods in compounding is found by multiplying the number of years times the number of times compounded per year.

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