1. Assume an interest rate of 5% per year. How much would you lose over 12 years if you had to give up interest on the interest-that is, if you received 60% instead of compounded interest?
A. 5%
B. 0%
C. 3%
D. 20%
2. What is the present value of receiving $650 in 7 years if you expect a rate of return of 7% a year?
A. $405
B. $844
C. $553
D. $664
3. What is the present value of receiving $500 a year for 5 years if you expect a rate of return of 8.0% a year?
A. $1,996
B. $1,900
C. $735
D. $1,501
4. Use the table below to answer the following question:
|
Present Value of 1
|
Present Value of an Annuity of 1
|
|
Period
|
5%
|
10%
|
5%
|
10%
|
|
1
|
0.9535
|
0.9091
|
0.9535
|
0.9091
|
|
2
|
0.9091
|
0.8264
|
1.8626
|
1.7355
|
|
3
|
0.8668
|
0.7513
|
2.7293
|
2.4869
|
|
4
|
0.8264
|
0.6830
|
3.5558
|
3.1699
|
|
5
|
0.7880
|
0.6209
|
4.3438
|
3.7908
|
|
6
|
0.7513
|
0.5645
|
5.0951
|
4.3553
|
|
Assumption: Required annual rate of return is 10%.
|
If an investment pays you $1,000 every 6 months for 3 years, what is its present value?
A. $4,729
B. $5,344
C. $5,095
D. $4,508
5. Use the table below to answer the following question:
|
Present Value of 1
|
Present Value of an Annuity of 1
|
|
Period
|
5%
|
10%
|
5%
|
10%
|
|
1
|
0.9535
|
0.9091
|
0.9535
|
0.9091
|
|
2
|
0.9091
|
0.8264
|
1.8626
|
1.7355
|
|
3
|
0.8668
|
0.7513
|
2.7293
|
2.4869
|
|
4
|
0.8264
|
0.6830
|
3.5558
|
3.1699
|
|
5
|
0.7880
|
0.6209
|
4.3438
|
3.7908
|
|
6
|
0.7513
|
0.5645
|
5.0951
|
4.3553
|
|
Assumption: Required annual rate of return is 10%.
|
If the investment pays $1,000 at the beginning of each 6-month period (starting with the initial investment date) for 3 years what would the present value be?
A. $4,508
B. $4,728
C. $5,344
D. $5,095
6. Use the table below to answer the following question:
|
Present Value of 1
|
Present Value of an Annuity of 1
|
|
Period
|
5%
|
10%
|
5%
|
10%
|
|
1
|
0.9535
|
0.9091
|
0.9535
|
0.9091
|
|
2
|
0.9091
|
0.8264
|
1.8626
|
1.7355
|
|
3
|
0.8668
|
0.7513
|
2.7293
|
2.4869
|
|
4
|
0.8264
|
0.6830
|
3.5558
|
3.1699
|
|
5
|
0.7880
|
0.6209
|
4.3438
|
3.7908
|
|
6
|
0.7513
|
0.5645
|
5.0951
|
4.3553
|
|
Assumption: Required annual rate of return is 10%.
|
What would the present value be if the investment pays you $6,000 at the end of 3 years?
A. $4,508
B. $5,344
C. $4,728
D. $5,095
E. $3,203
7. Use the table below to answer the following question:
|
Present Value of 1
|
Present Value of an Annuity of 1
|
|
Period
|
5%
|
10%
|
5%
|
10%
|
|
1
|
0.9535
|
0.9091
|
0.9535
|
0.9091
|
|
2
|
0.9091
|
0.8264
|
1.8626
|
1.7355
|
|
3
|
0.8668
|
0.7513
|
2.7293
|
2.4869
|
|
4
|
0.8264
|
0.6830
|
3.5558
|
3.1699
|
|
5
|
0.7880
|
0.6209
|
4.3438
|
3.7908
|
|
6
|
0.7513
|
0.5645
|
5.0951
|
43553
|
|
Assumption: Required annual rate of return is 10%.
|
What would the present value be if the investment pays you $2,000 at the end of each year for 3 years?
A. $4,958
B. $4,974
C. $5,471
D. $4,508
8. Use the table below to answer the question:
|
Present Value of an Annuity of 1
|
Future Value of an Annuity of 1
|
|
Period
|
3%
|
5%
|
6%
|
10%
|
3%
|
5%
|
6%
|
10%
|
|
5
|
4.5854
|
4.3438
|
4.2124
|
3.7908
|
5.3045
|
5.5125
|
5.6371
|
6.1051
|
|
6
|
5.4250
|
5.0951
|
4.9173
|
4.3553
|
6.4613
|
6.7816
|
6.9753
|
7.7156
|
|
7
|
6.2406
|
5.8114
|
5.5824
|
4.8684
|
7.6523
|
8.1126
|
8.3938
|
9.4872
|
|
8
|
7.0327
|
6.4944
|
6.2098
|
5.3349
|
8.8786
|
9.5085
|
9.8975
|
11.4359
|
|
9
|
7.8020
|
7.1457
|
6.8017
|
5.7590
|
10.1410
|
10.9726
|
11.4913
|
13.5795
|
|
10
|
8.5493
|
7.7666
|
7.3601
|
6.1446
|
11.4408
|
12.5082
|
13.1808
|
15.9374
|
|
11
|
9.2751
|
8.3586
|
7.8869
|
6.4951
|
12.7791
|
14.1187
|
14.9716
|
18.5312
|
|
12
|
9.9800
|
8.9231
|
8.3838
|
6.8137
|
14.1568
|
15.8078
|
16.8699
|
21.3843
|
Alicia gets a yearly alimony payment from her ex-husband and wants to saves enough to put a 25% down payment on a home in 5 years. Median homes go for $550,000. How much should Alicia put away into an investment each year if she can get a 6% return a year?
A. $12,018
B. $24,392
C. $16,083
D. $32,642
9. Use the table below to answer the following question:
|
Present Value of an Annuity of 1
|
Future Value of an Annuity of 1
|
|
Period
|
3%
|
5%
|
6%
|
10%
|
3%
|
5%
|
6%
|
10%
|
|
5
|
4.5854
|
4.3438
|
4.2124
|
3.7908
|
5.3045
|
5.5125
|
5.6371
|
6.1051
|
|
6
|
5.4250
|
5.0951
|
4.9173
|
4.3553
|
6.4613
|
6.7816
|
6.9753
|
7.7156
|
|
7
|
6.2406
|
5.8114
|
5.5824
|
4.8684
|
7.6523
|
8.1126
|
8.3938
|
9.4872
|
|
8
|
7.0327
|
6.4944
|
6.2098
|
5.3349
|
8.8786
|
9.5085
|
9.8975
|
11.4359
|
|
9
|
7.8020
|
7.1457
|
6.8017
|
5.7590
|
10.1410
|
10.9726
|
11.4913
|
13.5795
|
|
10
|
8.5493
|
7.7666
|
7.3601
|
6.1446
|
11.4408
|
12.5082
|
13.1808
|
15.9374
|
|
11
|
9.2751
|
8.3586
|
7.8869
|
6.4951
|
12.7791
|
14.1187
|
14.9716
|
18.5312
|
|
12
|
9.9800
|
8.9231
|
8.3838
|
6.8137
|
14.1568
|
15.8078
|
16.8699
|
21.3843
|
Alicia gets a yearly alimony payment from her ex-husband and wants to saves enough to put a 25% down payment on a home in 5 years. Median homes are currently at $550,000. How much should Alicia put away into an investment each year if she can get a 6% return a year? Median homes prices are expected to appreciate at the inflation rate of 3%?
A. $37,841
B. $18,645
C. $28,277
D. $13,933
10. Use the table below to answer the following question:
|
Present Value of an Annuity of 1
|
Future Value of an Annuity of 1
|
|
Period
|
3%
|
5%
|
6%
|
10%
|
3%
|
5%
|
6%
|
10%
|
|
5
|
4.5854
|
4.3438
|
4.2124
|
3.7908
|
5.3045
|
5.5125
|
5.6371
|
6.1051
|
|
6
|
5.4250
|
5.0951
|
4.9173
|
4.3553
|
6.4613
|
6.7816
|
6.9753
|
7.7156
|
|
7
|
6.2406
|
5.8114
|
5.5824
|
4.8684
|
7.6523
|
8.1126
|
8.3938
|
9.4872
|
|
8
|
7.0327
|
6.4944
|
6.2098
|
5.3349
|
8.8786
|
9.5085
|
9.8975
|
11.4359
|
|
9
|
7.8020
|
7.1457
|
6.8017
|
5.7590
|
10.1410
|
10.9726
|
11.4913
|
13.5795
|
|
10
|
8.5493
|
7.7666
|
7.3601
|
6.1446
|
11.4408
|
12.5082
|
13.1808
|
15.9374
|
|
11
|
9.2751
|
8.3586
|
7.8869
|
6.4951
|
12.7791
|
14.1187
|
14.9716
|
18.5312
|
|
12
|
9.9800
|
8.9231
|
8.3838
|
6.8137
|
14.1568
|
15.8078
|
16.8699
|
21.3843
|
Alicia wishes to save $220,000 in 5 years from alimony she receives. If Alicia receives alimony payments every 6 months and the next payment is tomorrow, how much money should she put away into a 6% return investment each time she receives an alimony payment?
A. $24,994
B. $18,677
C. $19,514
D. $26,113