Question :
21.If I invest $50,000 today for 5 years and it : 1237404
21.If I invest $50,000 today for 5 years and it grows to $84,253, what rate of interest have I received?
A. 5%.
B. 6%.
C. 11%.
D. 12%.
$50,000 × 1.68506 = $84,253 [$84,253/$50,000 = 1.685. On Future Value of $1 Table, 1.685 corresponds with 5 periods at 11% interest.]
22.How much must I invest today in order to have $25,000 in 5 years assuming 12% interest compounded annually?
A. $14,185.75.
B. $15,888.00.
C. $18,681.50.
D. $17.624.00.
$25,000 × .56743 = $14,185.75
23.Your wealthy aunt wishes to give you a trip to Paris when you graduate from college in three years. She estimates the trip will cost $4,000. How much must she invest now at 4% to accumulate enough for you to take this trip?
A. $3,287.72.
B. $3,556.00.
C. $4,499.44.
D. $3,161.24.
$4,000 × .88900 = $3,556.00
24.A scholarship fund has $75,000 to invest now to provide scholarships to high school students. They want to have at least $150,000 in 8 years. What rate of interest must they invest this money at to reach their goal?
A. 8%.
B. 9%.
C. 10%.
D. 11%.
$75,000/$150,000 = .50. On the Present Value of $1 Table, .50 corresponds to 8 years at 9%.
25.If I invest $100 at the end of each year for four years at 6% how much will I have at the end of the fourth year?
A. $421.24.
B. $437.46.
C. $563.71.
D. $432.95.
$100 × 4.37462 = $437.46
26.The difference between the present value and the future value of a sum of money depends upon:
A. The rate of interest.
B. The length of time.
C. The rate of interest and the length of time.
D. Neither the rate of interest nor the length of time.
27.The future value of an annuity is:
A. Always more than the present value.
B. Always less than the present value.
C. Equal to the present value.
D. Double the present value.
28.The present value of an investment is:
A. The amount an investor would pay today to receive a certain amount in the future.
B. The amount an investor would pay today plus the interest the investor would expect to receive a certain amount in the future.
C. The amount an investor would pay today less the interest the investor requires.
D. 90% of the future value of an investment.
29.Judy Bright has just won the lottery. She can elect to receive her winnings in equal payments of $200,000 a year for the next ten years on December 31 or to receive $2,000,000 immediately. If the current interest rate is 6%, which choice will provide the highest amount:
A. Receiving $2,000,000 immediately.
B. Taking equal payments for 10 years.
C. It does not matter since either choice provides the same amount.
D. Refusing to accept the winnings since it is not enough.
$200,000 × 7.36009 = $1,472,018 < $2,000,000
30.To determine the present value of a single amount to be received or paid at a future time you need to know all of the following except:
A. The interest rate or discount rate.
B. The number of periods.
C. The future value.
D. The time between periods.
