Question 1

If you put $300 into an account paying 2 percent interest,what will be the value of this account in 4 years?

Accepted Answer

A) $320.69 
B) $324.00 
C) $324.73 
D) $327.81

Question 2

You want to have $100,000 in five years.If the interest rate is 8 percent,about how much do you need to have today?

Accepted Answer

A) $66,225.25 
B) $67,556.42 
C) $68,058.32 
D) $71,428.57

Question 3

You receive $2,000 today which you plan to save for 15 years.If the interest rate is 4 percent,what is the future value of this $2,000?

Accepted Answer

A) $3,494.40 
B) $3,585.85 
C) $3,601.89 
D) $3,676.14

Question 4

You are better off choosing $400 in 4 years rather than $300 today if the interest rate is

Accepted Answer

A) lower than about 5.5 percent. 
B) higher than about 5.5 percent. 
C) lower than about 7.5 percent. 
D) higher than about 7.5 percent.

Question 5

When he was 18,Hussam put $100 into an account at an interest rate of 8 percent.He now has $158.69 in this account.For how many years did Hussam leave this money in his account?

Accepted Answer

A) 5 years 
B) 6 years 
C) 7 years 
D) 8 years

Question 6

Dobson Construction has an investment project that would cost $150,000 today and yield a one-time payoff of $167,000 in three years.Among the following interest rates,which is the highest one at which Dobson would find this project profitable?

Accepted Answer

A) 5 percent 
B) 4 percent 
C) 3 percent 
D) 2 percent

Question 7

You have a bond that entitles you to a one-time payment of $10,000 one year from now.The interest rate is 10 percent per year.How much is the bond worth today?

Accepted Answer

A) $9,090.91 
B) $10,000.00 
C) $8,264.46 
D) $9,523.81

Question 8

If you deposit $1,000 into a savings account that pays you 5% interest per year,approximately how long will it take to double your money?

Accepted Answer

A) 8 years 
B) 10 years 
C) 12 years 
D) 14 years

Question 9

Clint puts $200 into an account when the interest rate is 8 percent.Later he checks his balance and finds that he has a balance of about $272.10.How many years did Clint wait to check his balance?

Accepted Answer

A) 3 years 
B) 3.5 years 
C) 4 years 
D) 4.5 years

Question 10

According to the rule of 70,if the interest rate is 5 percent,how long will it take for the value of a savings account to double?

Accepted Answer

A) about 3.5 years 
B) about 6.3 years 
C) about 12 years 
D) about 14 years

Question 11

Yoyo's Frozen Yogurt,Inc.is thinking of building a new warehouse.They believe that this will give them $50,000 of additional revenue at the end of one year,$60,000 additional revenue at the end of two years,and $70,000 in additional revenue at the end of three years.If the interest rate is 5 percent,Yoyo would be willing to pay

Accepted Answer

A) $140,000,but not $150,000. 
B) $150,000,but not $160,000. 
C) $160,000,but not $170,000. 
D) $170,000,but not $180,000.

Question 12

At an annual interest rate of 14 percent,about how many years will it take $100 to double in value?

Accepted Answer

A) 3 
B) 4 
C) 5 
D) 7

Question 13

Suppose your uncle offers you $100 today or $150 in 10 years.You would prefer to take the $100 today if the interest rate is

Accepted Answer

A) 3 percent. 
B) 4 percent. 
C) 5 percent. 
D) None of the above is correct.

Question 14

What is the present value of a payment of $2,000 to be received two years from today if the interest rate is 5%?

Accepted Answer

A) $2205 
B) $2200 
C) $1818.18 
D) $1814.06

Question 15

What is the present value of a payment of $200 to be made one year from today if the interest rate is 10 percent?

Accepted Answer

A) $180 
B) $181.82 
C) $220 
D) $222.22

Question 16

Which of the following has a present value of $100?

Accepted Answer

A) $109.12 in two years when the interest rate is 4 percent 
B) $113.98 in two years when the interest rate is 6 percent 
C) $116.64 in two years when the interest rate is 8 percent 
D) $123.17 in two years when the interest rate is 10 percent

Question 17

What is the future value of $500 one year from today if the interest rate is 6 percent?

Accepted Answer

A) $515 
B) $520 
C) $530 
D) None of the above is correct.

Question 18

If the interest rate is 4 percent,then you would be equally happy if you received a gift of either $100 today or a gift of

Accepted Answer

A) $110.00 two years from today. 
B) $112.49 three years from today. 
C) $116.00 four years from today. 
D) $123.67 five years from today.

Question 19

What is the present value of a payment of $250 one year from today if the interest rate is 4 percent?

Accepted Answer

A) $240.38 
B) $242.24 
C) $244.40 
D) None of the above are correct to the nearest cent.

Question 20

If the interest rate is 7.5 percent,then what is the present value of $4,000 to be received in 6 years?

Accepted Answer

A) $2,420.68 
B) $2,591.85 
C) $2,996.33 
D) $3,040.63

Exam 14: The Basic Tools of Finance: Present Value Measuring the Time Value of Money