QUESTION 1

1. Annuities are

a. payments that are exactly the same in amount.

b. made at equally spaced intervals of time.

c. made monthly, quarterly or annually, for example.

d. all of the above.

2.A dollar today is worth more than the same dollar a year from now.

True

False

3..You receive your department budget information for March, which indicates that you have spent \$5,000 year to date. Your annual budget is \$20,000. What is the percent of budget you have used?

a. 25%

b. 45%

c. 60%

d. 75%

4.Compounding interest annually means

a. interest is earned on the initial deposit and also on interest earned in later years.

b. interest is earned on the initial deposit only.

c. interest is earned yearly after the deposit has been left in the bank for a minimum of five years.

d. none of the above.

5.When reviewing the Time Value of Money, discounting is

a. a process of finding the present value of cash flows.

b. the reverse of compounding.

c. a retailer marking down merchandise for sale.

d. a & b.

6.Assume we have \$100 invested for two years at 10 percent with monthly compounding interest. What is the future value after 2 years?

a. \$100.04

b. \$111.04

c. \$122.04

d. \$133.04

7.You have received your departmental sales figures for this past year. In comparing them to the prior year you have discovered that a decline has occurred. In 2007 your sales were \$125,000. In 2008 they are \$107,000. The percent of decrease that has occurred is

a. 12.2%

b. 14.4%

c. 16.6%

d. 18.8%

8.To save for retirement, you deposit \$1,000 into an IRA at the end of each year for the next 30 years. If the interest rate if 5% compounded annually, find the value of the IRA after 30 years.

a. \$30,000

b. \$41,736

c. \$54,839

d. \$66,439

9.How long does it take for \$856 to grow into \$1,122 at an annual interest rate of 7%?

a. 2 years

b. 4 years

c. 6 years

d. 30 onths

10 What annual interest rate is used if you lend someone \$1,850 and are repaid \$2,078.66 in two years?

a. 4%

b. 5%

c. 6%

d. 5.5%

11.What will a deposit of \$4,500 at 7% annual interest be worth if left in the bank for nine years?

a. \$7,723.25

b. \$8,279.23

c. \$8,385.78

d. \$8,273.25

12 What is the present value of \$800 to be received at the end of 8 years, assuming an annual interest rate of 8 percent?

a. \$425

b. \$432

c. 441

d. 437

13. Thirty years ago, Jesse Jones bought 10 acres of land for \$1,000 per acre in what is now downtown Houston. If this land grew in value at an annual interest rate of 8 percent, what is it worth today?

a. \$100,630

b. \$180,630

c. \$100,900

d. \$101,630

14. Find the present value of \$1,000 to be received at the end of 4 years at an interest rate of 12%, compounded semiannually.

a. \$622

b. \$627

c. 637

d. 675

15 Determine the value at the end of 3 years of a \$10,000 investment (today) in a bank certificate of deposit (CD) that pays an annual interest rate of 8 percent, compounded monthly.

a. \$13,652.27

b. \$12,812.37

c. \$12,702.37

d. \$12,642.37