Q1. Biff deposited $9,000 in a bank account, and 10 years later he closes out the account, which is worth $18,000. What is the annual interest rate over the 10 years?

a. 6.45%

b. 7.18%

c. 9.10%

d. 10.0%

Q2. You estimate you'll need $200,000 per year for 25 years starting on your 65th birthday to live on during your retirement. Today is your 50th birthday and you want to make equal deposits into an account paying 9% interest per year, the first deposit today and the last deposit on your 64th birthday. How much must each deposit be (rounded to the nearest $10)?

a. $99,920

b. $85,840

c. $61,385

d. $49,380

Q3. You won the lottery and can receive either (1. $60,000 today, or (2. $10,000 one year from today plus $25,000 two years from today plus $35,000 three years from today. You plan to use the money to pay for your child's college education in 15 years. You should

a. take the $60,000 today because of the time value of money regardless of current interest rates.

b. take option two because you get $70,000 rather than $60,000 regardless of current interest rates.

c. take the $60,000 today only if the current interest rate is at least 16.67%

d. take the $60,000 today if you can earn 6.81% per year or more on your investments

Q4. If Cathy deposits $12,000 into a bank account that pays 6% interest compounded quarterly, what will the account balance be in seven years?

a. 18,001

b. 18,207

c. 19,112

d. 19,344

Q5. You decide you want your child to be a millionaire. You have a son today and you deposit $10,000 in an investment account that earns 7% per year. The money in the account will be distributed to your son whenever the total reaches $1,500,000. How old will your son be when he gets the money (rounded to the nearest year)?

a. 82 years

b. 74 years

c. 60 years

d. 49 years

Q6. If you invest $750 every six months at 8 percent compounded semiannually, how much would you accumulate at the end of 10 years?

a. $10,065

b. $10,193

c. $22,334

d. $21,731

Q7. If you put $2,000 in a savings account that yields 8% compounded semiannually, how much money will you have in the account in 20 years (round to nearest $10)?

a. $6,789

b. $8,342

c. $9,602

d. $9,972

Q8. Two sisters each open IRAs in 2011 and plan to invest $3,000 per year for the next 30 years. Mary makes her first deposit on January 1, 2011, and will make all future deposits on the first day of the year. Jane makes her first deposit on December 31, 2011, and will continue to make her annual deposits on the last day of each year. At the end of 30 years, the difference in the value of the IRAs (rounded to the nearest dollar), assuming an interest rate of 7% per year, will be

a. $19,837.

b. $12,456.

c. $6,300.

d. $210.

Q9. You have the choice of two equally risk annuities, each paying $5,000 per year for 8 years. One is an annuity due and the other is an ordinary annuity. If you are going to be receiving the annuity payments, which annuity would you choose to maximize your wealth?

a. the annuity due

b. the ordinary annuity

c. Since we don't know the interest rate, we can't find the value of the annuities and hence we cannot tell which one is better.

d. either one because they have the same present value

Q10. You charged $1,000 on your credit card for Christmas presents. Your credit card company charges you 26% annual interest, compounded monthly. If you make the minimum payments of $25 per month, how long will it take ( to the nearest month) to pay off your balance?

a. 94 months

b. 79 months

c. 54 months

d. 40 months