1. Suppose an investment as an APR of 6.3% and interest is compounded monthly. Which of the following is the APY for this investment?1. A CD is a “certificate of deposit,” which is similar to a savings account, except you would be charged a large fee if you withdraw money from the account before the end of the term. Your bank is offering two CDs: a 3-year CD with an APY of 3.9%, or a 6-year CD with an APY of 4.1%. Which of the following is true?
A) It is better for you to invest your money in the 6-year CD.
B) There is not enough information provided to make a decision about which account is best.
C) It is better for you to invest your money in the 3-year CD, and then, at the end of three years, invest the final value of the first CD into another 3-year CD, which will also have an APY of 3.9%
D) Both options above are equivalent.
2. Suppose an investment as an APR of 6.3% and interest is compounded monthly. Which of the following is the APY for this investment?
A) There is not enough information given to compute the APY.
B) 6.484%
C) 6.300%
D) 6.513%
3. Suppose last week a particular stock was worth $25 per share, and this week that stock is worth $30 per share. What is the percent increase?
A) 16.7%
B) 20%
C) 1.2%
D) 83.3%
4. Suppose last week a particular stock was worth $25 per share, and this week that stock is worth $30 per share. Bao owns 400 shares. How much profit did Bao make during the past week?
A) $120
B) $400
C) $2,000
D) $12,000
5. Suppose in 1998, Chen spent $105 on shares of Apple stock.
In 1998, Apple stock cost 35 cents per share.
In 2000, there was a 2-for-1 stock split, meaning that the number of shares of Apple stock that a person owned was multiplied by 2 (this happens without requiring the owners to the stock to pay any additional money.)
In 2005, Apple stock split again, but this time a 7-for-1 split (multiply the number of Apple shares someone owns by 7).
Today, a share of Apple stock is worth $140.
How much is Chen’s initial $105 investment worth today?
A) About $588,000
B) About $42,000
C) About $294,000
D) About $140
E) About $205,800
6. If you hear that a mutual fund has an average annual return of 10%, does that mean that the mutual fund is increasing in value every year?
A) Not necessarily. It is possible to have a 10% average annual return when the fund gains value some years, and loses value other years.
B) Yes, the fund is increasing in value every year.