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    Quiz 1: D) 16.8 Years

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    Sauban Ahmed
    This document contains a 10 question quiz about finance concepts such as interest rates, compounding, present and future value, and annuities. The questions cover calculating interest earned at various rates compounded annually and daily, present and future values, amortizing loans, valuing annuities, and identifying which statements are correct about compound interest, discount rates, and compounding methods.

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    © All Rights Reserved
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    Quiz 1: D) 16.8 Years

    Uploaded by

    Sauban Ahmed
    170 views2 pages
    This document contains a 10 question quiz about finance concepts such as interest rates, compounding, present and future value, and annuities. The questions cover calculating interest earned at various rates compounded annually and daily, present and future values, amortizing loans, valuing annuities, and identifying which statements are correct about compound interest, discount rates, and compounding methods.

    Original Title

    Quiz_2

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    This document contains a 10 question quiz about finance concepts such as interest rates, compounding, present and future value, and annuities. The questions cover calculating interest earned at various rates compounded annually and daily, present and future values, amortizing loans, valuing annuities, and identifying which statements are correct about compound interest, discount rates, and compounding methods.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    170 views2 pages

    Quiz 1: D) 16.8 Years

    Uploaded by

    Sauban Ahmed
    This document contains a 10 question quiz about finance concepts such as interest rates, compounding, present and future value, and annuities. The questions cover calculating interest earned at various rates compounded annually and daily, present and future values, amortizing loans, valuing annuities, and identifying which statements are correct about compound interest, discount rates, and compounding methods.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Quiz 1

    1. How long would it take £800 to double in value if the interest rate were 4.2% per
    compounded annually?
    a) 12.4 years
    b) 14.6 years
    c) 15.8 years
    d) 16.8 years

    2. The ShortHolder bank pays 5.60%, compounded daily (based on 360 days), on a 9-
    month certificate of deposit. If you deposit $20,000 you would expect to earn around
    __________ in interest.
    a) $840
    b) $858
    c) $1,032
    d) $1,121

    3. In 2 years you are to receive $10,000. If the interest rate were to suddenly decrease, the
    present value of that future amount to you would __________.

    a) fall
    b) rise
    c) remain unchanged
    d) The correct answer cannot be determined without more information.

    4. You are considering borrowing $100,000 for 30 years at a compound annual interest
    rate of 9 percent. The loan agreement calls for 30 equal annual payments, to be paid at
    the end of each of the next 30 years. (Payments include both principal and interest.)
    What is the annual payment that will fully amortize the loan?

    a) $3,333.33
    b) $6,400.30
    c) $9,733.63
    d) $12,333.33

    5. What is the present value of a $1,000 ordinary annuity that earns 8% annually for an
    infinite number of periods?

    a) $80
    b) $800
    c) $1,000
    d) $12,500
    6. You want to have $1,000,000 when you retire in 30 years. You expect to earn 12%
    compounded monthly over the entire 30-year period. How much extra money per
    month must you deposit if you choose to fund using an ordinary annuity technique
    rather than an annuity due technique?

    a) $2.84
    b) $37.00
    c) $286.13
    d) $443.97

    7. Which of the following investment alternatives would provide the greatest ending
    wealth for your investment?

    a) 10% compounded daily (360 days).


    b) 10.5% compounded annually.
    c) 10.25% compounded quarterly.
    d) There is not sufficient information to determine the best alternative from the
    above information.

    8. Which of the following statements is most correct?

    a) The future value of an annuity due is greater than an otherwise identical


    ordinary annuity.
    b) A reduction in the discount rate will increase the future value of an otherwise
    identical cash flow stream.
    c) Continuous compounding will result in a higher present value relative to an
    otherwise identical investment that is compounded monthly at the same
    nominal rate.
    d) The FVIFA (i%, N periods) equals the sum of the PVIF(i%, n) for n=1 to N periods.

    9. Interest paid (earned) on both the original principal borrowed (lent) and previous
    interest earned is often referred to as __________.

    a) present value
    b) simple interest
    c) future value
    d) compound interest

    10. All other things being equal, I'd rather have $10,000 in 10 years than to receive $10,000
    today.

    a) True
    b) False

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