Question 1

What is the present value of $100,000 due exactly 4 years and 8 months from today if j2 = 9% and the practical method of discounting is used?

Accepted Answer

A) $66,324.55 
B) $66,310.35 
C) $66,296.00 
D) $65,358.66 
A) $66,324.55 
B) $66,310.35 
C) $66,296.00 
D) $65,358.66

Question 2

You invest $1000 today at j12 = 6%.After 2 years,the interest rate changes to j12 = 12%.How many years from today will it take the $1000 to grow to $10,000?

Accepted Answer

A) 21.28 years 
B) 20.28 years 
C) 19.28 years 
D) 18.28 years 
A) 21.28 years 
B) 20.28 years 
C) 19.28 years 
D) 18.28 years

Question 3

What simple interest rate r is equivalent to j4 = 8% if money is invested for 4 years?

Accepted Answer

A) 8.24% 
B) 8.33% 
C) 9.01% 
D) 9.32% 
A) 8.24% 
B) 8.33% 
C) 9.01% 
D) 9.32%

Question 4

You invest $1000 in a fund earning j1 = 6% in the first year,j2 = x% in the 2nd year,and j4 = 8% in the 3rd year.If the accumulated value is $1264.98 after three years,what is the value of x?

Accepted Answer

A) 10.00% 
B) 10.25% 
C) 10.50% 
D) 10.75% 
A) 10.00% 
B) 10.25% 
C) 10.50% 
D) 10.75%

Question 5

A woman plans to withdraw $1800 18-months from now,and $2400 36-months from now.How much does she need to deposit today if the interest rate is j12 = 12% for the first 2 years and j12 = 6% thereafter?

Accepted Answer

A) $3182.25 
B) $3765.40 
C) $3510.38 
D) $3285.18 
A) $3182.25 
B) $3765.40 
C) $3510.38 
D) $3285.18

Question 6

A loan of $15,000 is taken out with interest at j4 = 8%.What is the total amount of interest due on the loan in the second year?

Accepted Answer

A) $1338.41 
B) $1298.92 
C) $1296.00 
D) $1200.00 
A) $1338.41 
B) $1298.92 
C) $1296.00 
D) $1200.00

Question 7

Suppose the inflation rate in a country is 1% per month.How many years will it take for the purchasing power of $1 today to be cut in half?

Accepted Answer

A) 11.62 
B) 9.20 
C) 6.12 
D) 5.81 
A) 11.62 
B) 9.20 
C) 6.12 
D) 5.81

Question 8

An investment earns the following interest rates: 10% simple interest for 24 months,followed by 8% compounded quarterly for 36 months.What is the equivalent nominal rate compounded semi-annually that is earned over the 5-years?

Accepted Answer

A) 7.34% 
B) 7.49% 
C) 8.58% 
D) 8.76% 
A) 7.34% 
B) 7.49% 
C) 8.58% 
D) 8.76%

Question 9

You buy a motor boat worth $13,400.You can pay cash,or chose one of two payment options:
Option 1: Pay $10,000 in one year and $5000 in two years
Option 2: Pay $17,400 in 3 years
If the interest rate on both options is j12 = 9%,which one should you take and how much cheaper is it compared to paying cash?

Accepted Answer

A) Best option is to pay cash 
B) 1;$17.19 
C) 1;$78.46 
D) 2;$103.81 
A) Best option is to pay cash 
B) 1;$17.19 
C) 1;$78.46 
D) 2;$103.81

Question 10

You borrow $5000 today.The loan is due in 5 years,with interest at j1 = 7%.It is agreed that you can instead pay $1000 one year from now,$X two years from now and $2000 three years from now.If money is worth j4 = 8%,what is the value of X?

Accepted Answer

A) $2599.39 
B) $2648.80 
C) $2788.70 
D) $2794.38 
A) $2599.39 
B) $2648.80 
C) $2788.70 
D) $2794.38

Question 11

If inflation is 3.4% per year,what does the purchasing power of $1 today become in 10 years?

Accepted Answer

A) $0.716 
B) $0.746 
C) $1.340 
D) $1.397 
A) $0.716 
B) $0.746 
C) $1.340 
D) $1.397

Question 12

A company has a loan that is due on December 30,2009.At that time they are required to pay $20,000.What was the original amount of the loan if it was taken out on September 30,2007 at j4 = 12%?

Accepted Answer

A) $15,290.08 
B) $15,328.33 
C) $15,498.49 
D) $15,516.81 
A) $15,290.08 
B) $15,328.33 
C) $15,498.49 
D) $15,516.81

Question 13

You wish to have $4000 in 3-years time.If you invest $3000 today,what nominal rate j4 must you earn on your investment to reach your goal?

Accepted Answer

A) 9.62% 
B) 9.71% 
C) 10.06% 
D) 11.11% 
A) 9.62% 
B) 9.71% 
C) 10.06% 
D) 11.11%

Question 14

A long term promissory note is due on April 5,2013.The maturity value of the note on that date is $4720.56.On June 7,2010,the holder of the notes sells it to a bank who discounts the note at j2 = 14%.Using the practical method of crediting/charging interest,calculate the proceeds of the sale.

Accepted Answer

A) $3217.60 
B) $3218.30 
C) $3219.24 
D) $3221.52 
A) $3217.60 
B) $3218.30 
C) $3219.24 
D) $3221.52

Question 15

A car insurance company charges you a premium of $1452 a year for your car insurance policy.You have two options.Option 1 is to pay the $1452 in cash today.Option 2 is to make three payments of $499 at the following times: today,3-months from now and 6-months from now.What nominal rate of interest,j4,are you being charged?

Accepted Answer

A) 11.73% 
B) 12.12% 
C) 12.53% 
D) 13.06% 
A) 11.73% 
B) 12.12% 
C) 12.53% 
D) 13.06%

Question 16

A $2000 loan is to be repaid with payments of $1200 in 1 year,$800 in 4 years,and $400 in n years,assuming a nominal interest rate of 6% compounded annually.Determine n.

Accepted Answer

A) 4.59 
B) 6.37 
C) 9.18 
D) 14.74 
A) 4.59 
B) 6.37 
C) 9.18 
D) 14.74

Question 17

A non-interest bearing long term promissory note is due on February 1,2011.The loan amount was $30,000.On October 15th,2010 the note was sold to a bank that charges interest at j12 = 12%.How much did the bank pay for this note? Assume the practical (or approximate)method is used for fractional time periods.

Accepted Answer

A) $28,962.10 
B) $28,952.61 
C) $28,829.41 
D) $28,675.35 
A) $28,962.10 
B) $28,952.61 
C) $28,829.41 
D) $28,675.35

Question 18

A loan of $5000 is taken out today.It is due with interest at j4 = 8% in 2 years.Instead,the borrower negotiates with the lender to replace this loan with a payment of $2500 in 1-year and another payment of $X in 3-years.If the lender can reinvest any payment at j2 = 5%,what is the value of X?

Accepted Answer

A) $3038.93 
B) $2493.59 
C) $3581.68 
D) $3395.34 
A) $3038.93 
B) $2493.59 
C) $3581.68 
D) $3395.34

Question 19

You invest $20,000 today in a fund earning interest at j1 = 4%.How much will you have in 5 years,270 days if the exact method of accumulating is used?

Accepted Answer

A) $25,063.05 
B) $25,059.46 
C) $25,053.05 
D) $25,049.36 
A) $25,063.05 
B) $25,059.46 
C) $25,053.05 
D) $25,049.36

Question 20

Paul deposited $1000 in a savings account paying interest at j1 = 4.5%.The account has now grown to $1246.18.If he had been able to invest the same amount over twice as long in a fund paying interest at j1 = 5.5%,to what amount would his investment now have accumulated?

Accepted Answer

A) $1498.43 
B) $1882.35 
C) $1653.64 
D) $1708.14 
A) $1498.43 
B) $1882.35 
C) $1653.64 
D) $1708.14

What is the present value of $100,000 due exactly 4 years and 8 months from today if j₂ = 9% and the practical method of discounting is used?

You invest $1000 today at j₁₂ = 6%.After 2 years,the interest rate changes to j₁₂ = 12%.How many years from today will it take the $1000 to grow to $10,000?

What simple interest rate r is equivalent to j₄ = 8% if money is invested for 4 years?

You invest $1000 in a fund earning j₁ = 6% in the first year,j₂ = x% in the 2^nd year,and j₄ = 8% in the 3^rd year.If the accumulated value is $1264.98 after three years,what is the value of x?

A woman plans to withdraw $1800 18-months from now,and $2400 36-months from now.How much does she need to deposit today if the interest rate is j₁₂ = 12% for the first 2 years and j₁₂ = 6% thereafter?

A loan of $15,000 is taken out with interest at j₄ = 8%.What is the total amount of interest due on the loan in the second year?

Suppose the inflation rate in a country is 1% per month.How many years will it take for the purchasing power of $1 today to be cut in half?

An investment earns the following interest rates: 10% simple interest for 24 months,followed by 8% compounded quarterly for 36 months.What is the equivalent nominal rate compounded semi-annually that is earned over the 5-years?

You borrow $5000 today.The loan is due in 5 years,with interest at j₁ = 7%.It is agreed that you can instead pay $1000 one year from now,$X two years from now and $2000 three years from now.If money is worth j₄ = 8%,what is the value of X?

If inflation is 3.4% per year,what does the purchasing power of $1 today become in 10 years?

A company has a loan that is due on December 30,2009.At that time they are required to pay $20,000.What was the original amount of the loan if it was taken out on September 30,2007 at j₄ = 12%?

You wish to have $4000 in 3-years time.If you invest $3000 today,what nominal rate j₄ must you earn on your investment to reach your goal?

A long term promissory note is due on April 5,2013.The maturity value of the note on that date is $4720.56.On June 7,2010,the holder of the notes sells it to a bank who discounts the note at j₂ = 14%.Using the practical method of crediting/charging interest,calculate the proceeds of the sale.

A $2000 loan is to be repaid with payments of $1200 in 1 year,$800 in 4 years,and $400 in n years,assuming a nominal interest rate of 6% compounded annually.Determine n.

A loan of $5000 is taken out today.It is due with interest at j₄ = 8% in 2 years.Instead,the borrower negotiates with the lender to replace this loan with a payment of $2500 in 1-year and another payment of $X in 3-years.If the lender can reinvest any payment at j₂ = 5%,what is the value of X?

You invest $20,000 today in a fund earning interest at j₁ = 4%.How much will you have in 5 years,270 days if the exact method of accumulating is used?

Paul deposited $1000 in a savings account paying interest at j₁ = 4.5%.The account has now grown to $1246.18.If he had been able to invest the same amount over twice as long in a fund paying interest at j₁ = 5.5%,to what amount would his investment now have accumulated?

Simple Interest and Simple Discount

Simple Annuities

General and Other Annuities

Repayment of Debts

Bonds

Business Decisions, Capital Budgeting and Depreciation

Contingent Payments

Filters

Exam 2: Compound Interest

What is the present value of $100,000 due exactly 4 years and 8 months from today if j2 = 9% and the practical method of discounting is used?

You invest $1000 today at j12 = 6%.After 2 years,the interest rate changes to j12 = 12%.How many years from today will it take the $1000 to grow to $10,000?

What simple interest rate r is equivalent to j4 = 8% if money is invested for 4 years?

You invest $1000 in a fund earning j1 = 6% in the first year,j2 = x% in the 2nd year,and j4 = 8% in the 3rd year.If the accumulated value is $1264.98 after three years,what is the value of x?

A woman plans to withdraw $1800 18-months from now,and $2400 36-months from now.How much does she need to deposit today if the interest rate is j12 = 12% for the first 2 years and j12 = 6% thereafter?

A loan of $15,000 is taken out with interest at j4 = 8%.What is the total amount of interest due on the loan in the second year?

Suppose the inflation rate in a country is 1% per month.How many years will it take for the purchasing power of $1 today to be cut in half?

An investment earns the following interest rates: 10% simple interest for 24 months,followed by 8% compounded quarterly for 36 months.What is the equivalent nominal rate compounded semi-annually that is earned over the 5-years?

You borrow $5000 today.The loan is due in 5 years,with interest at j1 = 7%.It is agreed that you can instead pay $1000 one year from now,$X two years from now and $2000 three years from now.If money is worth j4 = 8%,what is the value of X?

If inflation is 3.4% per year,what does the purchasing power of $1 today become in 10 years?

A company has a loan that is due on December 30,2009.At that time they are required to pay $20,000.What was the original amount of the loan if it was taken out on September 30,2007 at j4 = 12%?

You wish to have $4000 in 3-years time.If you invest $3000 today,what nominal rate j4 must you earn on your investment to reach your goal?

A long term promissory note is due on April 5,2013.The maturity value of the note on that date is $4720.56.On June 7,2010,the holder of the notes sells it to a bank who discounts the note at j2 = 14%.Using the practical method of crediting/charging interest,calculate the proceeds of the sale.

A $2000 loan is to be repaid with payments of $1200 in 1 year,$800 in 4 years,and $400 in n years,assuming a nominal interest rate of 6% compounded annually.Determine n.

A loan of $5000 is taken out today.It is due with interest at j4 = 8% in 2 years.Instead,the borrower negotiates with the lender to replace this loan with a payment of $2500 in 1-year and another payment of $X in 3-years.If the lender can reinvest any payment at j2 = 5%,what is the value of X?

You invest $20,000 today in a fund earning interest at j1 = 4%.How much will you have in 5 years,270 days if the exact method of accumulating is used?

Paul deposited $1000 in a savings account paying interest at j1 = 4.5%.The account has now grown to $1246.18.If he had been able to invest the same amount over twice as long in a fund paying interest at j1 = 5.5%,to what amount would his investment now have accumulated?

Simple Interest and Simple Discount

Simple Annuities

General and Other Annuities

Repayment of Debts

Bonds

Business Decisions, Capital Budgeting and Depreciation

Contingent Payments

Filters

What is the present value of $100,000 due exactly 4 years and 8 months from today if j₂ = 9% and the practical method of discounting is used?

You invest $1000 today at j₁₂ = 6%.After 2 years,the interest rate changes to j₁₂ = 12%.How many years from today will it take the $1000 to grow to $10,000?

What simple interest rate r is equivalent to j₄ = 8% if money is invested for 4 years?

You invest $1000 in a fund earning j₁ = 6% in the first year,j₂ = x% in the 2^nd year,and j₄ = 8% in the 3^rd year.If the accumulated value is $1264.98 after three years,what is the value of x?

A woman plans to withdraw $1800 18-months from now,and $2400 36-months from now.How much does she need to deposit today if the interest rate is j₁₂ = 12% for the first 2 years and j₁₂ = 6% thereafter?

A loan of $15,000 is taken out with interest at j₄ = 8%.What is the total amount of interest due on the loan in the second year?

You borrow $5000 today.The loan is due in 5 years,with interest at j₁ = 7%.It is agreed that you can instead pay $1000 one year from now,$X two years from now and $2000 three years from now.If money is worth j₄ = 8%,what is the value of X?

A company has a loan that is due on December 30,2009.At that time they are required to pay $20,000.What was the original amount of the loan if it was taken out on September 30,2007 at j₄ = 12%?

You wish to have $4000 in 3-years time.If you invest $3000 today,what nominal rate j₄ must you earn on your investment to reach your goal?

A long term promissory note is due on April 5,2013.The maturity value of the note on that date is $4720.56.On June 7,2010,the holder of the notes sells it to a bank who discounts the note at j₂ = 14%.Using the practical method of crediting/charging interest,calculate the proceeds of the sale.

A loan of $5000 is taken out today.It is due with interest at j₄ = 8% in 2 years.Instead,the borrower negotiates with the lender to replace this loan with a payment of $2500 in 1-year and another payment of $X in 3-years.If the lender can reinvest any payment at j₂ = 5%,what is the value of X?

You invest $20,000 today in a fund earning interest at j₁ = 4%.How much will you have in 5 years,270 days if the exact method of accumulating is used?

Paul deposited $1000 in a savings account paying interest at j₁ = 4.5%.The account has now grown to $1246.18.If he had been able to invest the same amount over twice as long in a fund paying interest at j₁ = 5.5%,to what amount would his investment now have accumulated?