________ 5. Marcia invested $500 with the Simpleton Bank 3 years ago. The bank pays 3.5 percent simple

interest on its savings accounts. What is the total amount of interest Marcia has earned on her account over

the past 3 years?

a. $17.50 b $27.00 c. $37.50 d. $52.50

________ 6. You are 20 years old today. You want to retire at age 50 and have $4 million at that time. Assume you can

earn an average annual rate of return of 9.25 percent. Your hope is that you will win the lottery today and

be able to fund your retirement dream with one lump sum deposit today. How much would you have to win,

after taxes, to make an investment today sufficient to fund your dream?

a. $180,414.07 b. $281,459.96 c. $879,004.11 d. $1,307,468.24

________ 7. You purchased a new sports car 40 years ago at a cost of $3,900. Today, you sold that car for $97,500.

What annual rate of return did you earn on this vehicle?

a. 7.62 percent b. 7.99 percent c. 8.04 percent d. 8.38 percent

________ 8. Which one of the following statements is correct, all else held constant?

a. There is an inverse relationship between the present value and the future value.

b. The future value decreases as the time period increases.

c. The interest rate is inversely related to the present value.

d. The present value decreases as the time period decreases.

________ 9. Steve invested $2,500 this morning with The Branch Bank at 7 percent interest, compounded annually. After

making this investment, he discovered that he could have invested his money with Tyler Bank and earned 7

percent interest, compounded quarterly. How much additional interest could Steve have earned over the next

5 years if he had invested with the Tyler Bank instead of with The Branch Bank?

a. $30.57 b. $48.11 c. $52.60 d. $57.20

________ 10. Your goal is to earn an annual salary of $100,000 five years from now. You expect to increase your salary by

6.5 percent annually. How much do you need to earn this year if you are going to reach your goal?

a. $72,988.08 b. $84,311.16 c. $87,878.88 d. $84,363.13