Question 1

Susan put $375 into an account and one year later had $405.What interest rate was paid on Susan's deposit?
A)5 percent
B)7 percent
C)8 percent
D)10 percent

Accepted Answer

To find the interest rate, we can use the formula:

Interest = Principal x Rate x Time

Where Principal is the initial amount deposited, Rate is the interest rate, and Time is the duration for which the amount was deposited.

In this case, the Principal is $375, Time is 1 year, and the Interest is $405 - $375 = $30.

Substituting these values in the formula, we get:

30 = 375 x Rate x 1

Solving for the rate, we get:

Rate = 30/375 = 0.08 or 8%

Hence, Susan earned an interest rate of 8% on her deposit.

Question 2

Ellen deposited $500 into an account and two years later she had $561.80 in the account.What interest rate was paid on Ellen's deposit?
A)4.88 percent
B)6.00 percent
C)12.36 percent
D)None of the above is correct.

Accepted Answer

The answer of Ellen deposited $500 into an account and...

Question 3

Three people go to the bank to cash in their accounts.Amy had her money in an account for 25 years at 4 percent interest.Bill had his money in an account for 20 years at 5 percent interest.Celia had her money in an account for 5 years at 20 percent interest.If each of them originally deposited $500 in their accounts,which of them gets the most money when they cash in their accounts?
A)Amy
B)Bill
C)Celia
D)They each get the same amount.

Accepted Answer

Amy's account grows the most due to the power of compound interest over a longer period, despite the lower interest rate compared to Celia's.

Question 4

Clint puts $200 into an account when the interest rate is 8 percent.Later he checks his balance and finds that he has a balance of about $272.10.How many years did Clint wait to check his balance?
A)3 years
B)3.5 years
C)4 years
D)4.5 years

Accepted Answer

We can use the formula for compound interest:

A = P(1 + r/n)^(nt)

where A is the ending balance, P is the principal (initial deposit), r is the interest rate, n is the number of times compounded per year, and t is the time in years.

Plugging in the given values, we get:

272.10 = 200(1 + 0.08/1)^(1t)

Solving for t, we get t ≈ 4 years. Therefore, the answer is choice C, 4 years.

Question 5

Jarrod says that the future value of $250 saved for one year at 6 percent interest is less than the future value of $250 saved for two years at 3 percent interest.Simon says that the present value of a $250 payment to be received in one year when the interest rate is 6 percent is less than the value of a $250 payment to be received in two years when the interest rate is 3 percent.
A)Jarrod and Simon are both correct.
B)Jarrod and Simon are both incorrect.
C)Only Jarrod is correct.
D)Only Simon is correct.

Accepted Answer

The answer of Jarrod says that the future value of...

Question 6

When you were 10 years old,your grandparents put $500 into an account for you paying 7 percent interest.Now that you are 18 years old,your grandparents tell you that you can take the money out of the account.What is the balance to the nearest cent?
A)$1,200.00
B)$1,111.77
C)$983.58
D)$859.09

Accepted Answer

The answer of When you were 10 years old,your grandparents...

Question 7

Felix deposited $500 into an account two years ago.The first year he earned 3 percent interest and the second year he earned 5 percent interest.How much money does Felix have in his account now?
A)$540.75
B)$540.80
C)$540.85
D)None of the above are correct to the nearest cent.

Accepted Answer

Felix's account after the first year: $500 * 1.03 = $515. After the second year: $515 * 1.05 = $540.75.

Question 8

If you put $125 into an account that paid 3.25 percent interest,then how much money would you have in the account after 20 years?
A)$285.83
B)$236.98
C)$202.04
D)$145.65

Accepted Answer

The future value of an investment can be calculated using the formula for compound interest: FV = P(1 + r)^n, where P is the principal amount ($125), r is the annual interest rate (0.0325), and n is the number of years (20). Plugging in these values, FV = 125(1 + 0.0325)^20 ≈ $236.98.

Question 9

Veronica deposited $1,000 into an account two years ago.The first year she earned 7 percent interest;the second year she earned 5 percent.How much money does Veronica have in her account today?
A)$1,133.31
B)$1,120.00
C)$1,123.50
D)None of the above are correct to the nearest cent.

Accepted Answer

The answer of Veronica deposited $1,000 into an account two...

Question 10

Laura says that the present value of $700 to be received one year from today if the interest rate is 6 percent is less than the present value of $700 to be received two years from today if the interest rate is 3 percent.Cassie says that $700 saved for one year at 6 percent interest has a smaller future value than $700 saved for two years at 3 percent interest.
A)Both Laura and Cassie are correct.
B)Both Laura and Cassie are incorrect.
C)Only Laura is correct.
D)Only Cassie is correct.

Accepted Answer

The answer of Laura says that the present value of...

Question 11

Hector puts $150 into an account when the interest rate is 4 percent.Later he checks his balance and finds he has about $168.73.How long did Hector wait to check his balance?
A)3 years
B)3.5 years
C)4 years
D)4.5 years

Accepted Answer

The interest earned is $168.73 - $150 = $18.73. The interest rate is 4%, so the interest earned after 1 year is $150 * 0.04 = $6. The interest earned after 2 years is $150 * 0.04 * 2 = $12. The interest earned after 3 years is $150 * 0.04 * 3 = $18. So Hector waited 3 years to check his balance.

Question 12

Toni deposited $250 into an account and one year later she had $272.50 in the account.What interest rate was paid on Toni's deposit?
A)8 percent
B)9 percent
C)10 percent
D)None of the above is correct.

Accepted Answer

The answer of Toni deposited $250 into an account and...

Question 13

Marcia has four savings accounts.Which account has the largest balance?
A)$100 deposited 1 year ago at an 8 percent interest rate
B)$100 deposited 2 years ago at a 4 percent interest rate
C)$100 deposited 4 years ago at a 2 percent interest rate
D)$100 deposited 8 years ago at a 1 percent interest rate

Accepted Answer

The answer of Marcia has four savings accounts.Which account has...

Question 14

Jorge deposited $1,000 into an account three years ago.The first two years he earned 5 percent interest;the third year he earned 6 percent interest.How much money does Jorge have in his account today?
A)$1,157.90
B)$1,168.65
C)$1,176.00
D)None of the above are correct to the nearest cent.

Accepted Answer

To find out the answer, we need to calculate the interest earned in the first two years and the interest earned in the third year separately, and then add them to the original deposit.

Interest earned in the first two years:
5% of $1,000 = $50
After one year: $1,000 + $50 = $1,050
5% of $1,050 = $52.50
Total interest earned in the first two years: $50 + $52.50 = $102.50

Interest earned in the third year:
6% of $1,102.50 (original deposit + interest earned in the first two years) = $66.15

Total amount after three years:
$1,000 + $102.50 + $66.15 = $1,168.65

Therefore, Jorge has $1,168.65 in his account today, which is option B.

Question 15

Two years ago Darryl put $3,000 into an account paying 3 percent interest.How much does he have in the account today?
A)$3,180.00
B)$3,182.70
C)$3,183.62
D)None of the above are correct to the nearest cent.

Accepted Answer

The amount in the account after two years with 3% interest compounded annually is $3,182.70. This is calculated using the formula for compound interest: A = P(1 + r)^n, where P = $3,000, r = 0.03, and n = 2.

Question 16

Braden says that $400 saved for one year at 4 percent interest has a smaller future value than $400 saved for two years at 2 percent interest.Lefty says that the present value of $400 to be received one year from today if the interest rate is 4 percent exceeds the present value of $400 to be received two years from today if the interest rate is 2 percent.
A)Braden and Lefty are both correct.
B)Braden and Lefty are both incorrect.
C)Only Braden is correct.
D)Only Lefty is correct.

Accepted Answer

Braden is correct because the formula for future value is FV = PV(1 + r)^t, where PV is the present value, r is the interest rate, and t is the number of years. So, if you plug in the numbers for Braden's scenario, you get FV = 400(1 + 0.04)^1 = $416, and for Lefty's scenario, you get FV = 400(1 + 0.02)^2 = $408.16, which means Braden's investment has a higher future value.
However, Lefty is also correct because the formula for present value is PV = FV/(1 + r)^t, where FV is the future value, r is the interest rate, and t is the number of years. So, if you plug in the numbers for Lefty's scenario, you get PV = 400/(1 + 0.04)^1 = $384.62, and for Braden's scenario, you get PV = 400/(1 + 0.02)^2 = $392.16, which means Lefty's investment has a higher present value.

Question 17

Three years ago Dawn put $1,200 into an account paying 2 percent interest.How much is Dawn's account worth today?
A)$1,225.38
B)$1,248.48
C)$1,264.72
D)$1,273.45

Accepted Answer

The answer of Three years ago Dawn put $1,200 into...

Question 18

Bert put $75 into an account and one year later had $100.What interest rate was paid on Bert's deposit?
A)20 percent
B)25 percent
C)28 percent
D)None of the above is correct.

Accepted Answer

The answer of Bert put $75 into an account and...

Question 19

Lucretia puts $400 into an account when the interest rate is 10 percent.Later she checks her balance and finds it's worth about $708.62.How many years did she wait to check her balance?
A)5 years
B)6 years
C)7 years
D)8 years

Accepted Answer

The answer of Lucretia puts $400 into an account when...

Question 20

If you put $300 into an account paying 2 percent interest,what will be the value of this account in 4 years?
A)$320.69
B)$324.00
C)$324.73
D)$327.81

Accepted Answer

We can use the formula A=P(1+r/n)^(nt), where A is the final amount, P is the principal (initial amount), r is the annual interest rate as a decimal, n is the number of times the interest is compounded per year, and t is the time in years. Plugging in the given values, we get A=300(1+0.02/1)^(1*4)=324.73, rounded to the nearest cent. Therefore, the best choice is C.

Quiz 14: The Basic Tools of Finance: Present Value Measuring the Time Value of Money

Susan put $375 into an account and one year later had $405.What interest rate was paid on Susan's deposit?

Ellen deposited $500 into an account and two years later she had $561.80 in the account.What interest rate was paid on Ellen's deposit?

Clint puts $200 into an account when the interest rate is 8 percent.Later he checks his balance and finds that he has a balance of about $272.10.How many years did Clint wait to check his balance?

When you were 10 years old,your grandparents put $500 into an account for you paying 7 percent interest.Now that you are 18 years old,your grandparents tell you that you can take the money out of the account.What is the balance to the nearest cent?

Felix deposited $500 into an account two years ago.The first year he earned 3 percent interest and the second year he earned 5 percent interest.How much money does Felix have in his account now?

If you put $125 into an account that paid 3.25 percent interest,then how much money would you have in the account after 20 years?

Veronica deposited $1,000 into an account two years ago.The first year she earned 7 percent interest;the second year she earned 5 percent.How much money does Veronica have in her account today?

Hector puts $150 into an account when the interest rate is 4 percent.Later he checks his balance and finds he has about $168.73.How long did Hector wait to check his balance?

Toni deposited $250 into an account and one year later she had $272.50 in the account.What interest rate was paid on Toni's deposit?

Marcia has four savings accounts.Which account has the largest balance?

Jorge deposited $1,000 into an account three years ago.The first two years he earned 5 percent interest;the third year he earned 6 percent interest.How much money does Jorge have in his account today?

Two years ago Darryl put $3,000 into an account paying 3 percent interest.How much does he have in the account today?

Three years ago Dawn put $1,200 into an account paying 2 percent interest.How much is Dawn's account worth today?

Bert put $75 into an account and one year later had $100.What interest rate was paid on Bert's deposit?

Lucretia puts $400 into an account when the interest rate is 10 percent.Later she checks her balance and finds it's worth about $708.62.How many years did she wait to check her balance?

If you put $300 into an account paying 2 percent interest,what will be the value of this account in 4 years?