QUESTION $1$

If you invest $$100$ at $12$ percent for four years, how much would you have at the end of four years using compound interest?

A$.$ $$269$

B$.152\mathrm{.}32$

C$.$ $$193\mathrm{.}96$

D$.$ $$157\mathrm{.}35$

QUESTION $2$

An initial investment of $$500$ produces a cash flow of $$550$ one year from today. Calculate the rate of return on the project.

A$.25$ percent

B$.10$ percent

C$.15$ percent

D$.20$ percent

QUESTION $3$

Mr$.$ Hopper expects to retire in $30$ years, and he wishes to accumulate $$1,000,000$ in his retirement fund by that time. If the interest rate is $12$ percent per year, how much should Mr$.$ Hopper put into his retirement fund at the end of each year in order to achieve this goal?

A$.$ $$12,483\mathrm{.}17$

B$.$ $$4,000\mathrm{.}00$

C$.$ $$4,144$

D$.$ $$8,287\mathrm{.}32$

QUESTION $4$

Present value is defined as

A$.$ future cash flows discounted to the present by an appropriate discount rate.

B$.$ future cash flows multiplied by the factor $(1+$ r$)$t$.$

C$.$ inverse of future cash flows.

D$.$ present cash flows compounded into the future.

QUESTION $5$

If we invest $$1,500$ in a bank savings account where it will earn a nominal rate of $2$ percent per year, compounded semi$-$annually, how much will it be worth at the end of $3$ years? $($Round off the answer to the nearest cent.$)$

Answer $\_\_\_\_\_\_\_\_$

QUESTION $6$

An investment at $12$ percent APR compounded monthly is equal to an effective annual rate of

A$.12\mathrm{.}00$ percent.

B$.11\mathrm{.}87$ percent.

C$.12\mathrm{.}36$ percent.

D$.12\mathrm{.}68$ percent.

QUESTION $7$

The concept of compound interest is best described as

A$.$ the inverse of simple interest.

B$.$ interest earned on an investment.

C$.$ the total amount of interest earned over the life of an investment.

D$.$ interest earned on interest.

QUESTION $8$

A dollar today is worth more than a dollar tomorrow if the interest rate is positive.

True

False

QUESTION $9$

An asset that pays a fixed amount each period for a specified number of periods is an annuity.

True

False

QUESTION $10$

A perpetuity is defined as a sequence of

A$.$ unequal cash flows occurring at equal intervals of time forever.

B$.$ equal cash flows occurring at equal intervals of time forever.

C$.$ unequal cash flows occurring at equal intervals of time for a specific number of periods.

D$.$ equal cash flows occurring at equal intervals of time for a specific number of periods.

QUESTION $11$

The present value of $$100,000$ expected at the end of one year, at a discount rate of $25$ percent per year, is

A$.75,000$

B$.80,000$

C$.100,000$

D$.125,000$

QUESTION $12$

What is the present value of $$10,000$ per year in perpetuity at an annual interest rate of $10$ percent? Assume the perpetuity starts in one year.

A$.$ $$10,000\mathrm{.}00$

B$.$ $$1,000\mathrm{.}00$

C$.$ $$200,000\mathrm{.}00$

D$.$ $$100,000\mathrm{.}00$

QUESTION $13$

What is the present value of a $$1,000$ per year annuity for five years at an interest rate of $12$ percent?

A$.3604\mathrm{.}78$

B$.6352\mathrm{.}85$

C$.2743\mathrm{.}28$

D$.567\mathrm{.}43$

QUESTION $14$

For $$10,000,$ you can purchase a five$-$year annuity that will pay $$2,358\mathrm{.}65$ per year for five years. The payments occur at the beginning of each year. Calculate the effective annual interest rate implied by this arrangement.

A$.9$ percent

B$.10$ percent

C$.8$ percent

D$.11$ percent

QUESTION $15$

Mr$.$ Williams expects to retire in $30$ years and would like to accumulate $$1$ million in his pension fund. If the annual interest rate is $12$ percent, how much should Mr$.$ Williams put into his pension fund each month in order to achieve his goal? $($Assume that Mr$.$ Williams will deposit the same amount each month into his pension fund, using monthly compounding.$)$

A$.345\mathrm{.}3$

B$.437\mathrm{.}13$

C$.771\mathrm{.}6$

D$.286\mathrm{.}13$

QUESTION $16$

John House has taken a $$250,000$ mortgage on his house at an interest rate of $7$ percent per year. If the mortgage calls for $25$ equal annual payments, what is the amount of each payment?

A$.10,334\mathrm{.}52$

B$.16,616\mathrm{.}36$

C$.21,452\mathrm{.}63$

D$.23,943\mathrm{.}78$

QUESTION $17$

You would like to have enough money saved after your retirement such that you and your heirs can receive $$100,000$ per year in perpetuity. How much would you need to have saved at the time of your retirement in order to achieve this goal? $($Assume that the perpetuity payments start one year after the date of your retirement. The annual interest rate is $12\mathrm{.}5$ percent.$)$

A$.$ $$1,000,000\mathrm{.}00$

B$.$ $$800,000\mathrm{.}00$

C$.$ $$1,125,000\mathrm{.}00$

D$.$ $$10,000,000\mathrm{.}00$

QUESTION $18$

After retirement, you expect to live for $25$ years. You would like to have $$90,000$ income each year. How much should you have saved in your retirement account to receive this income, if the annual interest rate is $5$ percent per year? $($Assume that the payments start on the day of your retirement.$)$

A$.$ $$2,368,253\mathrm{.}25$

B$.$ $$3,389,837\mathrm{.}39$

C$.$ $$1,331,877\mathrm{.}76$

D$.$ $$1,221,906\mathrm{.}21$

QUESTION $19$

You just inherited a trust that will pay you $$100,000$ per year in perpetuity. However, the first payment will not occur for exactly five more years. Assuming an $8$ percent annual interest rate, what is the value of this trust?

A$.$ $$918,787$

B$.$ $$850,729$

C$.$