# Quiz 12: Compound Interest and Present Value

Business

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Q 7Q 7

The rate to be used in compounding is found by taking the annual rate divided by the number of times compounded per day.

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True False

Q 8Q 8

The number of periods in compounding is found by multiplying the number of years times the number of times compounded per year.

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True False

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True False

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True False

Q 11Q 11

A compound table factor of 1.2950 means that $1 at a certain rate of interest for a certain period of time will increase in value to approximately $1.30.

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True False

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True False

Q 13Q 13

The number of periods for a table lookup on $5,000 at 12% compounded semiannually for 10 years is 10 periods.

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True False

Q 14Q 14

The rate for a table lookup on a $4,000, 12% investment compounded quarterly for four years is 4%.

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True False

Q 15Q 15

Using the table in the handbook, the table factor for compounding $4,000 at 9% compounded annually for one year is 1.0900.

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True False

Q 16Q 16

The interest on $3,000 at 8% compounded semiannually for six years by using the table lookup (use table in handbook) is $1,803.

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True False

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True False

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True False

Q 19Q 19

The effective rate (APY) can be calculated by the interest for one year divided by the principal.

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True False

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True False

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Q 22Q 22

Using the interest for daily compounding (in your handbook), $700 would grow to $790 at the end of three years at 8% interest.

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True False

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Q 25Q 25

A table factor of .7513 from a present value table means that if $.75 is invested at a certain rate of interest for a certain number of periods, it would be worth $1 in the past.

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True False

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True False

Q 27Q 27

$14,182 is the present value of $21,000 that earns at a bank 12% compounded quarterly for four years. (Use table in handbook.)

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True False

Q 28Q 28

Compounding:
A)Calculates interest periodically
B)Looks into the present when the future is known
C)Is done only on an annual basis
D)Results in less interest than simple interest
E)None of these

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Multiple Choice

Q 29Q 29

In tables for calculating compound interest, the number of periods is equal to:
A)Number of years divided by rate
B)Number of years × rate
C)Number of years × number of times compounded per year
D)Number of years divided by number of times compounded per year
E)None of these

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Multiple Choice

Q 30Q 30

The rate used in the table for calculating compound interest is found by:
A)Annual rate × number of periods
B)Annual rate × number of times compounded per year
C)Annual rate divided by number of times compounded per year
D)Annual rate divided semiannually
E)None of these

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Multiple Choice

Q 31Q 31

Using the table in handbook, the value of $60 deposited in a bank for six years at a rate of 10% compounded annually is:
A)$96.63
B)$96.36
C)$106.30
D)$106.03
E)None of these

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Multiple Choice

Q 32Q 32

The interest on $6,000 at 6% compounded semiannually for eight years is (use table in the handbook):
A)$3,628.20
B)$3,682.02
C)$362.82
D)$13,628.20
E)None of these

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Multiple Choice

Q 33Q 33

The effective rate (APY) is:
A)The nominal rate
B)The stated rate
C)The true semiannual rate
D)The true annual rate
E)None of these

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Multiple Choice

Q 34Q 34

Effective rate (APY) is:
A)Never related to compound table
B)Interest for one year divided by annual rate
C)Interest for one year divided by principal for two years
D)Interest for one year divided by principal
E)None of these

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Multiple Choice

Q 35Q 35

Using the table in your handbook, $6,000 for six years at 8½% compounded daily will grow to:
A)$8,991.02
B)$8,950.10
C)$9,991.20
D)$9,990.02
E)None of these

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Multiple Choice

Q 36Q 36

Present value does not:
A)Know future amount
B)Know the present dollar amount
C)Find present dollar amount
D)Use tables
E)None of these

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Multiple Choice

Q 37Q 37

A table factor of .7312 from a present value table of $1 means that a certain rate of interest for a certain period of time will equal:
A)$1
B)Over $1
C)Less than $1
D)Never equal
E)None of these

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Multiple Choice

Q 38Q 38

Using the table in the handbook, the present value of $12,000 for six years compounded at 6% semiannually is:
A)$12,814.08
B)$8,461.08
C)$8,416.80
D)$8,614.80
E)None of these

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Multiple Choice

Q 39Q 39

$20,000 for 14 years compounded at 8% semiannually results in how many periods?
A)64
B)28
C)12
D)14
E)None of these

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Multiple Choice

Q 40Q 40

$100,000 for 20 years compounded at 4% annually results in a rate per period of:
A)3%
B)5%
C)4%
D)1%
E)None of these

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Multiple Choice

Q 41Q 41

Sam Monte deposits $21,500 into Legal Bank, which pays 6% interest that is compounded semiannually. Using the table in the handbook, what will Sam have in his account at the end of six years?
A)$29,760.30
B)$30,654.70
C)$30,456.07
D)$29,670.03
E)None of these

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Multiple Choice

Q 42Q 42

Anne Katz, the owner of Katz Sport Shop, lends $8,000 to Shelley Slater to help her open an art shop. Shelley plans to repay Anne at the end of eight years with interest compounded semiannually at 8%. At the end of eight years, Anne will receive (use the tables in the handbook):
A)$14,984
B)$16,857
C)$16,587
D)$14,484
E)None of these

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Multiple Choice

Q 43Q 43

Merle Fonda opened a new savings account. She deposited $40,000 at 10% compounded semiannually. At the start of the fourth year, Merle deposits an additional $20,000 that is also compounded semiannually at 10%. At the end of six years, the balance in Merle's account is (use the tables in the handbook):
A)$73,604.00
B)$53,604.00
C)$80,406.00
D)$98,636.72
E)None of these

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Multiple Choice

Q 44Q 44

Mia Kaminsky wants to attend Riverside Community College. She will need to have $25,000 six years from today. Mia is wondering what she will have to put in the bank today so that she will have $25,000 six years from now. Her bank pays 5% compounded semiannually. Using the tables in the handbook, the amount Mia will have to deposit is:
A)$18,950
B)$33,226
C)$18,590
D)$33,622
E)None of these

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Multiple Choice

Q 45Q 45

Gracie Shay wants to buy a new Hummer in five years. Gracie estimates the cost of the Hummer will be $28,000. If she invests $12,000 now at a rate of 6% compounded semiannually, she:
A)Will have enough money
B)Will have exactly $16,000
C)Will have $18,000
D)Will have $16,126.80
E)None of these

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Multiple Choice

Q 46Q 46

Jane is having difficulty deciding whether to put her savings in the Mystic Bank or in the Four Rivers Bank. Mystic offers a 12% rate compounded quarterly, and Four Rivers offers 14% compounded semiannually. Jane has $40,000 to invest and expects to withdraw the money at the end of five years. (Use the tables in the handbook.) The best deal is:
A)Four Rivers
B)Four Rivers for first two years
C)Mystic
D)Mystic for last two years
E)None of these

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Multiple Choice

Q 47Q 47

Earl Miller deposited $25,000 at Y Bank at an interest rate of 12% compounded quarterly. (Use the tables in the handbook.) The effective rate (APY) is:
A)12%
B)12.55%
C)12.15%
D)13.2%
E)None of these

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Multiple Choice

Q 48Q 48

Al Miler, the owner of Al's Garage, estimates that he will need $29,000 for new equipment in 15 years. Al decides that he will put aside the money now so that in 15 years the $29,000 will be available. His bank offers him 10% interest compounded semiannually. (Use the tables in the handbook.) Al must invest today:
A)$6,710.60
B)$6,942.60
C)$6,701.60
D)$125,335.10
E)None of these

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Multiple Choice

Q 49Q 49

Burton Bush wants to retire in Arizona when he is 80 years of age. Burton, who is now 55, believes he will need $400,000 to retire comfortably. To date, he has set aside no retirement money. If he gets an interest rate of 6% compounded annually, he will have to invest today (use the tables in the handbook):
A)$92,300
B)$69,900
C)$96,500
D)$93,200
E)None of these

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Multiple Choice

Q 50Q 50

Jim Moore opens a new savings account. He deposits $12,000 at 12% compounded semiannually. At the start of the fourth year, Jim deposits an additional $50,000 that is also compounded semiannually at 12%. At the end of six years, the balance in Jim Moore's account is (use the tables in the handbook):
A)$66,081.20
B)$50,000.00
C)$16,081.20
D)$88,555.42
E)None of these

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Multiple Choice

Q 51Q 51

Interest on $2,630 at 3% compounded semiannually for five years is:
A)$304.90
B)$414.49
C)$569.92
D)$418.96
E)None of these

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Multiple Choice

Q 52Q 52

Ellen deposits $6,773 into an account earning 1% annually. After seven years what will Ellen's balance have grown to, including interest?
A)$7,516.68
B)$7,516.88
C)$7,261.33
D)$6,836.78
E)None of these

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Multiple Choice

Q 53Q 53

Lisa Richter deposited $5,000 at 4% compounded semiannually for three years. At the beginning of the fourth year, Lisa deposited $2,500. What would her balance be at the end of five years assuming she is still earning 4% compounded semiannually?
A)$5131
B)$8131
C)$8,800
D)$8,800.99
E)None of these

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Multiple Choice

Q 54Q 54

Trisha Long wants to buy a boat in five years. She estimates the boat will cost $15,000 at that time. What must Trisha deposit today in an account earning 5% annually to have enough to buy the boat in five years?
A)$12,328.50
B)$11,527.50
C)$11,752.50
D)$11,077.50
E)None of these

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Multiple Choice

Q 55Q 55

Katie Hector wants to purchase a condo in Oxford, MS, in 20 years. The cost of the condo is expected to be $180,000. Assuming she can earn 6% annually, what should Katie deposit today?
A)$126,900
B)$56,124
C)$89,400
D)$180,000
E)None of these

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Multiple Choice

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Essay