Question 1

When a loan is paid off in equal installments,this is called a(n)________ loan.

Accepted Answer

A) amortized 
B) discounted 
C) balloon 
D) reverse annuity 
E) none of the above 
A) amortized 
B) discounted 
C) balloon 
D) reverse annuity 
E) none of the above

Question 2

Is it possible to save $585,000 for retirement instead of $310,000 without requiring much more to be invested every month?

Accepted Answer

A) Probably not with inflation working against you 
B) Depends upon the interest rate or return you earn on the investment as well as the number of years until retirement 
C) Absolutely not 
D) There is not enough information to answer this question. 
A) Probably not with inflation working against you 
B) Depends upon the interest rate or return you earn on the investment as well as the number of years until retirement 
C) Absolutely not 
D) There is not enough information to answer this question.

Question 3

At the end of each year for ten years you deposit $750 in an account that earns an annual rate of return of 12%.What is the present value of these deposits?

Accepted Answer

A) $4,329.39 
B) $5,241.48 
C) $3,161.55 
D) $4,237.67 
E) $4,482.63 
A) $4,329.39 
B) $5,241.48 
C) $3,161.55 
D) $4,237.67 
E) $4,482.63

Question 4

At the age of 20,James is starting to save for retirement.If inflation averages 4 percent annually until his retirement age and he earns an average annual rate of return of 13 percent on his investments during this period,he should be able to enjoy a comfortable retirement.

Accepted Answer

A) True 
 B)False

Question 5

If your bank pays you interest in the form of an annual rate of return of 10% over each of the next five years,how much will your balance be if you make annual deposits of $400?

Accepted Answer

A) $2,248.37 
B) $2,644.20 
C) $2,516.31 
D) $2,442.04 
A) $2,248.37 
B) $2,644.20 
C) $2,516.31 
D) $2,442.04

Question 6

You inherited $25,000 today and placed it in an account that earns an 8% annual rate of return.What will be the value of the account after 25 years?

Accepted Answer

A) $50,000 
B) $110,897 
C) $121,307 
D) $171,212 
A) $50,000 
B) $110,897 
C) $121,307 
D) $171,212

Question 7

Define an amortized loan and give two common examples.

Accepted Answer

An amortized loan is a loan paid off in

Question 8

This helpful investment rule-of-thumb tells you approximately how many years it takes for a sum of money to double in size.

Accepted Answer

A) Rule of compound interest 
B) Rule of 72 
C) Rule of 100 
D) Rule of future value 
E) Rule of annuity doubling 
A) Rule of compound interest 
B) Rule of 72 
C) Rule of 100 
D) Rule of future value 
E) Rule of annuity doubling

Question 9

If Arnold were to leave his money in the account until he was 68,by approximately what amount would the balance increase between his 62nd and 68th years?

Accepted Answer

A) $113,667 
B) $1,096,471 
C) $160,457 
D) $1,973 
A) $113,667 
B) $1,096,471 
C) $160,457 
D) $1,973

Question 10

Describe the effects and benefits of compound interest.

Accepted Answer

Compounding interest means that interest

Question 11

One day as you were going through some old memorabilia,you discovered an old savings account in which you placed $100 twenty years ago.When you checked out the account,it currently had a balance of $320.71.What annual rate of interest did you earn?

Accepted Answer

A) 12% 
B) 10% 
C) 8% 
D) 6% 
A) 12% 
B) 10% 
C) 8% 
D) 6%

Question 12

By the Rule of 72,what annual interest rate would be required to turn $100 into $200 in approximately six years?

Accepted Answer

A) 4% 
B) 8% 
C) 12% 
D) 16% 
A) 4% 
B) 8% 
C) 12% 
D) 16%

Question 13

Time Value of Money calculations can be made much easier through the use of a financial calculator.

Accepted Answer

A) True 
 B)False

Question 14

The present value interest factor is the inverse of the corresponding future value interest factor.

Accepted Answer

A) True 
 B)False

Question 15

What is the future value of a stream of $800 annual payments worth to the investor at the end of 10 years if these payments are invested at an annual rate of return of 8.5%?

Accepted Answer

A) $11,868.08 
B) $12,195.22 
C) $13,334.90 
D) $13,667.88 
A) $11,868.08 
B) $12,195.22 
C) $13,334.90 
D) $13,667.88

Question 16

Assuming that you can afford a car payment of $400 for 36 months,which of the following is closest to the annual interest rate you would need on a loan to borrow $12,000 for a new car?

Accepted Answer

A) 10.99 percent 
B) 11.26 percent 
C) 12.25 percent 
D) 12.99 percent 
A) 10.99 percent 
B) 11.26 percent 
C) 12.25 percent 
D) 12.99 percent

Question 17

Mark borrows $15,000 to buy a new car.His loan has an annual interest rate of 6.5%,compounded monthly,and his monthly payment is $293.49.How much will he have paid in interest when he has finished repaying his loan in 60 months?

Accepted Answer

A) $43.49 
B) $1,575.50 
C) $2,609.40 
D) $17,609.40 
A) $43.49 
B) $1,575.50 
C) $2,609.40 
D) $17,609.40

Question 18

How much can you borrow today if you can make payments of $3,600 a year for the next five years and the interest rate is 10%?

Accepted Answer

A) $13,646.83 
B) $12,235.32 
C) $18,978.36 
D) $15,797.84 
E) $17,949.67 
A) $13,646.83 
B) $12,235.32 
C) $18,978.36 
D) $15,797.84 
E) $17,949.67

Question 19

What would be the interest rate on a loan of $39,927.10 that you paid off with annual payments of $10,000 for each of the next five years?

Accepted Answer

A) 8% 
B) 10% 
C) 15% 
D) 21% 
E) 26% 
A) 8% 
B) 10% 
C) 15% 
D) 21% 
E) 26%

Question 20

You decide to save for retirement by investing $10,000 a year in an account that will earn a 6% annual rate of return.How much will you have in the account when you retire in 45 years?

Accepted Answer

A) $450,000 
B) $3,277,222 
C) $2,127,435 
D) $1,256,743 
A) $450,000 
B) $3,277,222 
C) $2,127,435 
D) $1,256,743

When a loan is paid off in equal installments,this is called a(n)________ loan.

Is it possible to save $585,000 for retirement instead of $310,000 without requiring much more to be invested every month?

At the end of each year for ten years you deposit $750 in an account that earns an annual rate of return of 12%.What is the present value of these deposits?

At the age of 20,James is starting to save for retirement.If inflation averages 4 percent annually until his retirement age and he earns an average annual rate of return of 13 percent on his investments during this period,he should be able to enjoy a comfortable retirement.

If your bank pays you interest in the form of an annual rate of return of 10% over each of the next five years,how much will your balance be if you make annual deposits of $400?

You inherited $25,000 today and placed it in an account that earns an 8% annual rate of return.What will be the value of the account after 25 years?

Define an amortized loan and give two common examples.

This helpful investment rule-of-thumb tells you approximately how many years it takes for a sum of money to double in size.

If Arnold were to leave his money in the account until he was 68,by approximately what amount would the balance increase between his 62nd and 68th years?

Describe the effects and benefits of compound interest.

One day as you were going through some old memorabilia,you discovered an old savings account in which you placed $100 twenty years ago.When you checked out the account,it currently had a balance of $320.71.What annual rate of interest did you earn?

By the Rule of 72,what annual interest rate would be required to turn $100 into $200 in approximately six years?

Time Value of Money calculations can be made much easier through the use of a financial calculator.

The present value interest factor is the inverse of the corresponding future value interest factor.

What is the future value of a stream of $800 annual payments worth to the investor at the end of 10 years if these payments are invested at an annual rate of return of 8.5%?

Assuming that you can afford a car payment of $400 for 36 months,which of the following is closest to the annual interest rate you would need on a loan to borrow $12,000 for a new car?

Mark borrows $15,000 to buy a new car.His loan has an annual interest rate of 6.5%,compounded monthly,and his monthly payment is $293.49.How much will he have paid in interest when he has finished repaying his loan in 60 months?

How much can you borrow today if you can make payments of $3,600 a year for the next five years and the interest rate is 10%?

What would be the interest rate on a loan of $39,927.10 that you paid off with annual payments of $10,000 for each of the next five years?

You decide to save for retirement by investing $10,000 a year in an account that will earn a 6% annual rate of return.How much will you have in the account when you retire in 45 years?

The Financial Planning Process

Measuring Your Financial Health and Making a Plan

Tax Planning and Strategies

Cash or Liquid Asset Management

Using Credit Cards: the Role of Open Credit

Student and Consumer Loans: the Role of Planned Borrowing

The Home and Automobile Decision

Life and Health Insurance

Property and Liability Insurance

Investment Basics

Investing in Stocks

Investing in Bonds and Other Alternatives

Mutual Funds: an Easy Way to Diversify

Retirement Planning

Estate Planning: Saving Your Heirs Money and Headaches

Financial Life Eventsfitting the Pieces Together

Filters

Exam 3: Understanding and Appreciating the Time Value of Money

When a loan is paid off in equal installments,this is called a(n)________ loan.

Is it possible to save $585,000 for retirement instead of $310,000 without requiring much more to be invested every month?

At the end of each year for ten years you deposit $750 in an account that earns an annual rate of return of 12%.What is the present value of these deposits?

At the age of 20,James is starting to save for retirement.If inflation averages 4 percent annually until his retirement age and he earns an average annual rate of return of 13 percent on his investments during this period,he should be able to enjoy a comfortable retirement.

If your bank pays you interest in the form of an annual rate of return of 10% over each of the next five years,how much will your balance be if you make annual deposits of $400?

You inherited $25,000 today and placed it in an account that earns an 8% annual rate of return.What will be the value of the account after 25 years?

Define an amortized loan and give two common examples.

This helpful investment rule-of-thumb tells you approximately how many years it takes for a sum of money to double in size.

If Arnold were to leave his money in the account until he was 68,by approximately what amount would the balance increase between his 62nd and 68th years?

Describe the effects and benefits of compound interest.

One day as you were going through some old memorabilia,you discovered an old savings account in which you placed $100 twenty years ago.When you checked out the account,it currently had a balance of $320.71.What annual rate of interest did you earn?

By the Rule of 72,what annual interest rate would be required to turn $100 into $200 in approximately six years?

Time Value of Money calculations can be made much easier through the use of a financial calculator.

The present value interest factor is the inverse of the corresponding future value interest factor.

What is the future value of a stream of $800 annual payments worth to the investor at the end of 10 years if these payments are invested at an annual rate of return of 8.5%?

Assuming that you can afford a car payment of $400 for 36 months,which of the following is closest to the annual interest rate you would need on a loan to borrow $12,000 for a new car?

Mark borrows $15,000 to buy a new car.His loan has an annual interest rate of 6.5%,compounded monthly,and his monthly payment is $293.49.How much will he have paid in interest when he has finished repaying his loan in 60 months?

How much can you borrow today if you can make payments of $3,600 a year for the next five years and the interest rate is 10%?

What would be the interest rate on a loan of $39,927.10 that you paid off with annual payments of $10,000 for each of the next five years?

You decide to save for retirement by investing $10,000 a year in an account that will earn a 6% annual rate of return.How much will you have in the account when you retire in 45 years?

The Financial Planning Process

Measuring Your Financial Health and Making a Plan

Tax Planning and Strategies

Cash or Liquid Asset Management

Using Credit Cards: the Role of Open Credit

Student and Consumer Loans: the Role of Planned Borrowing

The Home and Automobile Decision

Life and Health Insurance

Property and Liability Insurance

Investment Basics

Investing in Stocks

Investing in Bonds and Other Alternatives

Mutual Funds: an Easy Way to Diversify

Retirement Planning

Estate Planning: Saving Your Heirs Money and Headaches

Financial Life Eventsfitting the Pieces Together

Filters