Question 1

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 pay $2500 in 1 year and $X in 3 years.If the lender can reinvest any payment at j2 = 5%,what is the value of X?

Accepted Answer

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

Question 2

You invest $5000 into a fund paying interest at j6 = 9%.How much is in the fund after 3 years?

Accepted Answer

A) $6350.00 
B) $6475.15 
C) $6511.30 
D) $6536.70

Question 3

In a particular year,the interest rate is 5% and the real rate of return is 3%.What is the rate of inflation for the same year?

Accepted Answer

A) 2.06% 
B) 2.00% 
C) 1.94% 
D) 1.85%

Question 4

What nominal interest rate compounded continuously is equivalent to 10% compounded quarterly?

Accepted Answer

A) 9.53% 
B) 9.75% 
C) 9.88% 
D) 10.38%

Question 5

A woman who died left an estate worth $200 000 to be split among her two children,currently age 8 and 12.Each child is to receive an equal amount,X,from the estate when they reach age 18.If the money can be invested at j2 = 6%,how much does each child receive when they turn 18? (Answer to nearest dollar)

Accepted Answer

A) $142,576 
B) $159,355 
C) $179,356 
D) $180,611

Question 6

Rank the following interest rates in the order in which they would give the highest to lowest amount of interest on an investment:
a. j2 = 15.25%
b. j4 = 15.1%
c. j12 = 14.85%

Accepted Answer

A) a > b > c 
B) c > a > b 
C) c > b > a 
D) b > c > a

Question 7

If money doubles at a certain rate of interest compounded monthly in 6 years,how long will it take for the same amount of money to triple in value?

Accepted Answer

A) 10.40 years 
B) 9.51 years 
C) 8.35 years 
D) Cannot be determined

Question 8

You deposit $1000 today in an account that pays interest at j2 = 8% for the next 5 years and j2 = 6% thereafter.How many complete interest periods will it take for you to accumulate at least double your original investment?

Accepted Answer

A) 11 periods 
B) 18 periods 
C) 21 periods 
D) 24 periods

Question 9

What is the accumulated value of $5000 at the end of 4 years,11 months if j4 = 9% using the exact method?

Accepted Answer

A) $7588.52 
B) $7638.07 
C) $7708.09 
D) $7744.89

Question 10

You borrow $2000 today.The loan is due in 3 years,with interest at j1 = 9%.It is agreed that you will instead pay $1000 one year from now and $X two years from now.If money is worth j2 = 6%,what is the value of X?

Accepted Answer

A) $1190.12 
B) $1286.20 
C) $1380.48 
D) $1529.16

Question 11

You invest $1000 for 3 years in a fund earning j1 = 6% in the first year,j2 = x% in the second year,and j4 = 8% in the third 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%

Question 12

A promissory note with a maturity value of $20,000 is sold to a bank 32-months before maturity.The bank discounts the note using j2 =16%.What are the proceeds,if the practical method is used?

Accepted Answer

A) $13,275.57 
B) $13,258.11 
C) $13,266.92 
D) $12,939.48

Question 13

A promissory note for $10,000,dated July 1,2007,is due in four years with interest at j2 = 8%.On October 1,2008,it was sold to an investor who discounted the note at j4 = 9%.What was the purchase price of the note on October 1,2008?

Accepted Answer

A) $10,714.46 
B) $10,955.53 
C) $11,176.77 
D) $11,975.31

Question 14

What is the total amount of interest earned between the end of 18 months and the end of 36 months on an investment of $1000 if the interest rate is j12 = 9%?

Accepted Answer

A) $308.65 
B) $164.69 
C) $154.94 
D) $143.96

Question 15

$10,000 was deposited into an investment account earning interest at a nominal rate of 9% compounded monthly for eight years.How much interest was earned in the fifth year?

Accepted Answer

A) $1468.72 
B) $1342.76 
C) $1303.11 
D) $1270.42

Question 16

Jim Dandy invests a sum of money today.He earns the following interest rates over the next 5-years:
J2 = 10% for the first 2-years
J4 = 8% for the next 2-years
J12 = 6% for the last year
What annual effective rate of return,j1,did Jim earn over the 5-year period?

Accepted Answer

A) Less than 8% 
B) 8% or more,but less than 8.5% 
C) 8.5% or more,but less than 9% 
D) more than 9%

Question 17

A long-term promissory note for $40,000 is taken out on June 15,2010.The interest rate on the note is j4 = 7% and the note is due on Dec 15,2015.What is the maturity value of the note?

Accepted Answer

A) $58,597.50 
B) $58,589.15 
C) $58,398.79 
D) $57,581.47

Question 18

How much money do you need today in order to have $3000 in 21 months time,if interest is compounded continuously at 9%?

Accepted Answer

A) $2741.79 
B) $2564.34 
C) $2562.83 
D) $453.22

Question 19

A person invests $2000 today in a fund earning interest at j1 = 6%.If the rate of inflation is 2.1% in the first year and 3.0% in the second year,how much is the investment worth,in real terms (after taking account of inflation),at the end of two years?

Accepted Answer

A) $2131.30 
B) $2136.87 
C) $2138.15 
D) $2140.34

Question 20

You invest $1500 today and another $2000 18-months from today in a fund earning j4 = 8% for the first 18 months followed by j2 = 6% thereafter.How much do you have at the end of 4 years?

Accepted Answer

A) $4007.79 
B) $4274.59 
C) $4276.84 
D) $4377.73

Exam 2: Compound Interest

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 pay $2500 in 1 year and $X in 3 years.If the lender can reinvest any payment at j₂ = 5%,what is the value of X?

You invest $5000 into a fund paying interest at j₆ = 9%.How much is in the fund after 3 years?

In a particular year,the interest rate is 5% and the real rate of return is 3%.What is the rate of inflation for the same year?

What nominal interest rate compounded continuously is equivalent to 10% compounded quarterly?

Rank the following interest rates in the order in which they would give the highest to lowest amount of interest on an investment: a. j₂ = 15.25% b. j₄ = 15.1% c. j₁₂ = 14.85%

If money doubles at a certain rate of interest compounded monthly in 6 years,how long will it take for the same amount of money to triple in value?

You deposit $1000 today in an account that pays interest at j₂ = 8% for the next 5 years and j₂ = 6% thereafter.How many complete interest periods will it take for you to accumulate at least double your original investment?

What is the accumulated value of $5000 at the end of 4 years,11 months if j₄ = 9% using the exact method?

You borrow $2000 today.The loan is due in 3 years,with interest at j₁ = 9%.It is agreed that you will instead pay $1000 one year from now and $X two years from now.If money is worth j₂ = 6%,what is the value of X?

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

A promissory note with a maturity value of $20,000 is sold to a bank 32-months before maturity.The bank discounts the note using j₂ =16%.What are the proceeds,if the practical method is used?

A promissory note for $10,000,dated July 1,2007,is due in four years with interest at j₂ = 8%.On October 1,2008,it was sold to an investor who discounted the note at j₄ = 9%.What was the purchase price of the note on October 1,2008?

What is the total amount of interest earned between the end of 18 months and the end of 36 months on an investment of $1000 if the interest rate is j₁₂ = 9%?

$10,000 was deposited into an investment account earning interest at a nominal rate of 9% compounded monthly for eight years.How much interest was earned in the fifth year?

Jim Dandy invests a sum of money today.He earns the following interest rates over the next 5-years: J₂ = 10% for the first 2-years J₄ = 8% for the next 2-years J₁₂ = 6% for the last year What annual effective rate of return,j₁,did Jim earn over the 5-year period?

A long-term promissory note for $40,000 is taken out on June 15,2010.The interest rate on the note is j₄ = 7% and the note is due on Dec 15,2015.What is the maturity value of the note?

How much money do you need today in order to have $3000 in 21 months time,if interest is compounded continuously at 9%?

A person invests $2000 today in a fund earning interest at j₁ = 6%.If the rate of inflation is 2.1% in the first year and 3.0% in the second year,how much is the investment worth,in real terms (after taking account of inflation) ,at the end of two years?

You invest $1500 today and another $2000 18-months from today in a fund earning j₄ = 8% for the first 18 months followed by j₂ = 6% thereafter.How much do you have at the end of 4 years?

Exam 2: Compound Interest

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 pay $2500 in 1 year and $X in 3 years.If the lender can reinvest any payment at j2 = 5%,what is the value of X?

You invest $5000 into a fund paying interest at j6 = 9%.How much is in the fund after 3 years?

In a particular year,the interest rate is 5% and the real rate of return is 3%.What is the rate of inflation for the same year?

What nominal interest rate compounded continuously is equivalent to 10% compounded quarterly?

Rank the following interest rates in the order in which they would give the highest to lowest amount of interest on an investment: a. j2 = 15.25% b. j4 = 15.1% c. j12 = 14.85%

If money doubles at a certain rate of interest compounded monthly in 6 years,how long will it take for the same amount of money to triple in value?

You deposit $1000 today in an account that pays interest at j2 = 8% for the next 5 years and j2 = 6% thereafter.How many complete interest periods will it take for you to accumulate at least double your original investment?

What is the accumulated value of $5000 at the end of 4 years,11 months if j4 = 9% using the exact method?

You borrow $2000 today.The loan is due in 3 years,with interest at j1 = 9%.It is agreed that you will instead pay $1000 one year from now and $X two years from now.If money is worth j2 = 6%,what is the value of X?

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

A promissory note with a maturity value of $20,000 is sold to a bank 32-months before maturity.The bank discounts the note using j2 =16%.What are the proceeds,if the practical method is used?

A promissory note for $10,000,dated July 1,2007,is due in four years with interest at j2 = 8%.On October 1,2008,it was sold to an investor who discounted the note at j4 = 9%.What was the purchase price of the note on October 1,2008?

What is the total amount of interest earned between the end of 18 months and the end of 36 months on an investment of $1000 if the interest rate is j12 = 9%?

$10,000 was deposited into an investment account earning interest at a nominal rate of 9% compounded monthly for eight years.How much interest was earned in the fifth year?

Jim Dandy invests a sum of money today.He earns the following interest rates over the next 5-years: J2 = 10% for the first 2-years J4 = 8% for the next 2-years J12 = 6% for the last year What annual effective rate of return,j1,did Jim earn over the 5-year period?

A long-term promissory note for $40,000 is taken out on June 15,2010.The interest rate on the note is j4 = 7% and the note is due on Dec 15,2015.What is the maturity value of the note?

How much money do you need today in order to have $3000 in 21 months time,if interest is compounded continuously at 9%?

A person invests $2000 today in a fund earning interest at j1 = 6%.If the rate of inflation is 2.1% in the first year and 3.0% in the second year,how much is the investment worth,in real terms (after taking account of inflation) ,at the end of two years?

You invest $1500 today and another $2000 18-months from today in a fund earning j4 = 8% for the first 18 months followed by j2 = 6% thereafter.How much do you have at the end of 4 years?

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 pay $2500 in 1 year and $X in 3 years.If the lender can reinvest any payment at j₂ = 5%,what is the value of X?

You invest $5000 into a fund paying interest at j₆ = 9%.How much is in the fund after 3 years?

Rank the following interest rates in the order in which they would give the highest to lowest amount of interest on an investment: a. j₂ = 15.25% b. j₄ = 15.1% c. j₁₂ = 14.85%

You deposit $1000 today in an account that pays interest at j₂ = 8% for the next 5 years and j₂ = 6% thereafter.How many complete interest periods will it take for you to accumulate at least double your original investment?

What is the accumulated value of $5000 at the end of 4 years,11 months if j₄ = 9% using the exact method?

You borrow $2000 today.The loan is due in 3 years,with interest at j₁ = 9%.It is agreed that you will instead pay $1000 one year from now and $X two years from now.If money is worth j₂ = 6%,what is the value of X?

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

A promissory note with a maturity value of $20,000 is sold to a bank 32-months before maturity.The bank discounts the note using j₂ =16%.What are the proceeds,if the practical method is used?

A promissory note for $10,000,dated July 1,2007,is due in four years with interest at j₂ = 8%.On October 1,2008,it was sold to an investor who discounted the note at j₄ = 9%.What was the purchase price of the note on October 1,2008?

What is the total amount of interest earned between the end of 18 months and the end of 36 months on an investment of $1000 if the interest rate is j₁₂ = 9%?

Jim Dandy invests a sum of money today.He earns the following interest rates over the next 5-years: J₂ = 10% for the first 2-years J₄ = 8% for the next 2-years J₁₂ = 6% for the last year What annual effective rate of return,j₁,did Jim earn over the 5-year period?

A long-term promissory note for $40,000 is taken out on June 15,2010.The interest rate on the note is j₄ = 7% and the note is due on Dec 15,2015.What is the maturity value of the note?

A person invests $2000 today in a fund earning interest at j₁ = 6%.If the rate of inflation is 2.1% in the first year and 3.0% in the second year,how much is the investment worth,in real terms (after taking account of inflation) ,at the end of two years?

You invest $1500 today and another $2000 18-months from today in a fund earning j₄ = 8% for the first 18 months followed by j₂ = 6% thereafter.How much do you have at the end of 4 years?