Question 1

1. $100 invested at a rate of 5% for 10 years has the same future value as $100 invested at 10% compounded annually for 5 years.
2. A. TRUE
3. B. FALSE

5 points

Question 2

1. Assume that Don is 45 years old and has 20 years for saving until he retires. He expects an APR of 8.5% on his investments. How much does he need to save if he puts money away annually in equal end-of-the-year amounts to achieve a future value of one million dollars in 20 years' time?
2. A. $20,670.97
3. B. $20,770.90
4. C. $20,800.00
5. D. $20,570.00

5 points

Question 3

1. Four years ago, Robert's annual salary was $52,500. Today, he earns $73,800. What has been the average annual rate of growth of Robert's salary?
2. A. 5%
3. B. 10.38%
4. C. 41.52%
5. D. 8.89%

5 points

Question 4

1. You intend to buy a vacation home in seven years and plan to have saved $50,000 for a down payment. How much money would you have to place today into an investment that earns 8% per year to have enough for your desired down payment?
2. A. $29,175
3. B. $29,100
4. C. $37,065
5. D. $25,000

5 points

Question 5

1. Suppose you invest $2,000 today, compounded monthly with an APR of 7.50%. What is your investment worth in one year?
2. A. $2,154.77
3. B. $2,155.27
5. C. $2,152.81
6. D. $2,150.00

5 points

Question 6

1. What is the EAR if the APR is 5% and compounding is quarterly?
2. A. Slightly above 5.09%
3. B. Over 5.25%
4. C. Under 5.00%
5. D. Slightly below 5.09%

5 points

Question 7

1. A two-year investment of $200 is made today at an annual interest rate of 6%. Which of the following statements is true?
2. A. The FV is $224.00.
4. B. The PVis $178.00.
6. C. This question is irrelevant because there are no two-year investments that earn an average of 6% per year.
7. D. The FV is $224.72.

5 points

Question 8

1. You have a choice between a lottery lump sum payout of $3,800,000 today or a series of twenty annual annuity due payments. At a discount rate of 6.00%, how large must the annual annuity due payments be to make you indifferent between the two choices?
2. A. $190,000.00
3. B. $312,548.41
4. C. $331,301.32
5. D. $351,179.40

5 points

Question 9

1. You just bought a home for $250,000 and are scheduled to make monthly payments of $1,834.41 for 30 years at 8% APR. Suppose you add $400 each month to the $1,834.41 house payment, making your monthly payment $2,234.41. This extra amount is applied to the principal. How long will it take you to pay off your loan of $250,000?
2. A. It will take about 216 months.
3. B. It will take about 16.5 years.
4. C. It will take about 15.5 years.
5. D. It will take about 206 months.

5 points

Question 10

1. Assume you just bought a new home and now have a mortgage on the home. The amount of the principal is $150,000, the loan is at 5% APR, and the monthly payments are spread out over 30 years. What is the loan payment?
2. A. $798.95
3. B. $850.32
5. C. $903.47
6. D. $805.23