- Submitted By: ruthysbeauty
- Date Submitted: 09/14/2016 9:24 PM
- Category: Business
- Words: 5744
- Page: 23

1) Your grandmother places $13,000 into an account earning an interest rate of 7% per year. After 5 years the account will be valued at $18,233.17. Which of the following statements is correct?

A) The present value is $13,000, the time period is 7 years, the present value is $18,233.17, and the interest rate is 5%.

B) The future value is $13,000, the time period is 5 years, the principal is $18,233.17, and the interest rate is 7%.

C) The principal is $13,000, the time period is 5 years, the future value is $18,233.17, and the interest rate is 7%.

D) The principal is $13,000, the time period is 7 years, the future value is $18,233.17, and the interest rate is 5%.

Answer: C

Explanation: C) The $13,000 is the principal or present value, the interest rate is stated as 7%, the time period is identified as 5 years, and the future value is $18,233.17.

2) The one-time payment of money at a future date is often called a ________.

A) lump-sum payment

B) present value

C) principal amount

D) perpetuity payment

Answer: A

3) A $100 deposit today that earns an annual interest rate of 10% is worth how much at the end of two years? Assume all interest received at the end of the first year is reinvested the second year.

A) $100

B) $120

C) $121

D) $122

Answer: C

4) An investment of $100 today is worth $116.64 at the end of two years if it earns an annual interest rate of 8%. How much interest is earned in the first year and how much in the second year of this investment?

A) The interest earned in year one is $8.32 and the interest earned in year two is $8.32.

B) The interest earned in year one is $8.00 and the interest earned in year two is $8.64.

C) The interest earned in year one is $8.64 and the interest earned in year two is $8.00.

D) There is not enough information to solve this problem.

Answer: B

5) ________ is simply the interest earned in subsequent periods on the interest earned in prior periods.

A) Quoted interest

B) Anticipated...