Fianance

Practice Questions - Chapters 5 and 6

1.

How much money do you need to place into a bank account which pays a 6% annual rate in order

to have $500 at the end of 7 years?

a) $332.53

b) $751.82

c) $463.77

2.

How much money would you need to place in an account to have $1,000 10 years from today?

Assume the account pays 8.5% and it is compounded monthly. Round to the nearest $1.

a) $893

b) $932

c) $442

3.

d) $429

e) $833

Columbia Corporation deposited $2,000 in an account that pays 12% interest annually. If the

interest is compounded continuously, how much money will be in the account at the end of 20

years?

a) $19,293

b) $22,046

c) $22,553

4.

d) $629.52

e) $333.17

d) $22,704

e) $22,900

Which of the following provides the greatest annual return?

a) 16% compounded quarterly

d) 16% compounded annually

b) 15% compounded continuously e) all of the above are equal

c) 15.2% compounded daily

5.

If you borrow $25,000 from a local finance company and you are required to pay $4,424.50 per

year for 10 years, what is the annual interest rate on the loan?

a) 12%

b) 18.9%

c) 15.9%

6.

d) 13.6%

e) 14.4%

How much do you have to deposit today so that you can withdraw $50,000 a year at the end of

years 5 through 9, and $25,000 at the end of year 10? Assume that you can earn an annual rate of

8 percent.

a) $170,983

b) $146,591

c) $146,737

d) $158,318

e) $159,243

7.

If you want to have $875 in 36 months, how much money must you put in a savings account

today? Assume that the savings account pays 16% and it is compounded quarterly. Round to the

nearest $1.

a) $213

b) $147

c) $543

8.

You just purchased a parcel of land for $10,000. If you expect a 12 percent annual rate of return

on your investment, how much will you sell the land for in 10 years?

a) $25,000

b) $31,058

c) $31,384

9.

d) $5,051

e) $1,922

Suppose you invest $500 in a stock mutual fund at the end of each month. When...