FIN 3000 Chapter 5 Quiz

fifteen years ago, you invested $5000. today it is worth $18250. what annually compounded rate of interest did you earn?

9.01%

you have just received notification that you have won the $1.25 million first prize in the centennial lottery. the prize will be awarded on your 100th birthday, 79 years from now. the appropriate discount rate is 6.4 percent, compounded annually. what is the present value of your winnings?

$9300.82

kroencke freight is saving money to build a new loading platform. three years ago, they set aside $23000 for this purpose. today, that account is worth $31406. what annually compounded rate of interest is the firm earning on this investment?

10.94%

for each of the following, compute the future value $2700 11 years 13% $9652 7 years 9% $85355 14 years 12% $192796 8 years 6 %

10356.83 17644.23 417139.47 307139.47

assume your mother invested a lump sum 28 years ago at 4.05 percent interest, compounded annually. today, she gave you the proceeds of that investment, totaling $48613.24. how much did your mother originally invest

$15994.70

two years ago, you invested $2500. today, it is worth $3300. what rate of interest did you earn?

14.89%

assume you own a violin currently valued at $64000. if the value increases by 2.5% annually, how much will the violin be worth 15 years from now?

$92691.08

you would like to give your child $100,000 to start a career 25 years from now. how much money must you set aside today for this purpose of you can earn 6.8% on your investments?

19307.17

miles invested $5000 ten years ago and expected to have $10000 today. he has neither added nor withdrawn any money wince his initial investment. all interest was reinvested and compounded annually. as it turns out, he only has $8400 in his account today. which one of the following statements must be true

he earned a lower interest rate than he expected

which one of the following variables is the exponent in the present value formula

number of time periods

hayley won a lottery and will receive $1000 each year for the next 30 years. the current value of these winnings is called the

present value

for each of the following, compute the present value 13 years 7 % $16051 4 years 13% $57557 29 years 14% 892073 40 years 9 % 556164

$6660.59 $35300.79 $19959.96 $17706.92

assume you are investing $100 today in a savings account. which one of the following terms refers to the total value of this investment one year from now?

future value

what is the future value of $11600 invested for 14 years at 6.15% compounded annually

$26740.87

assume the average motor home selling price in the united states last year was$36420. the average price seven years earlier was $27208. what was the annual increase in the selling price over this time period?

4.25%

assume the total cost of a college education will be $245000 when your child enters college in 15 years. you presently have $108000 to invest for this purpose. what annually compounded rate of interest must you earn to cover the cost of your child's college education?

5.61%

some time ago, dak purchased land costing $67900. today, that land is valued at $62800. if the land has been decreasing by 1.3 percent per year, how long has he owned this land? (hint: solving for N)

5.97 years

you have just made your first $4600 contribution to your retirement account. assume you earn a return of 12 percent per year and make no additional contributions a. what will your account be worth when you retire in 31 years? b. what if you wait 10 years before contributing?

a. 203324.44 b. 59897.01

on your tenth birthday, you received $300 which you invested at 4.5% interest, compounded annually. your investment is now worth $756. how old are you today?

age 30

cullen invested $500 five years ago and earns 6 percent annual interest. by leaving his interest earnings in his account, he increases the amount of interest he earns each year. his investment is best described as benefitting from

compounding

andrew just calculated the present value of a $15000 bonus he will receive next year. the interest rate he used in his calculations is referred to as the:

discount rate

madelyn is calculating the present value of a bonus she will receive next year. the process she is using is called

discounting