Chapter 1 Reading

Marie will be receiving $300 per year for the next six years. The interest on the account is 5% compounded annually. What is the present value of this annuity?

$1,523

Paul invested $185. The interest earned is 4%, compounded annually. At the end of two years, Paul will have about:

$200

Common financial goals and activities include:

-purchasing life insurance -purchasing health insurance -planning for retirement

Samantha is trying to decide between two investments. The first one will earn 5% simple interest annually. The second investment will earn 5% compounded quarterly. Assuming they have the same amount of risk, which is the better investment?

5% compounded quarterly

A series of equal deposits or payments is called a(n):

annuity

The amount to which current savings will increase based on a certain interest rate and a certain time period is called:

future value

Individuals with poor credit ratings will typically pay:

higher interest rates

Another name used for discounting is:

present value

An ideal financial goal for a full-time student might include:

saving for higher education

Your financial goals are the basis for measuring the progress of which of the following?

spending, saving, investment activities

What is the current value of a future amount based on a certain interest rate and a certain time period?

Present value

What is the typical time frame for an intermediate goal?

Two to five years

what is the current value of a future amount based on a certain interest rate and a certain time period?

Present value

If you deposit $500 per year in an account for six years at 9%, how much will you have in the account at the end of the deposit period?

$3,762

Paula needs to have $400 in three years/ The interest earned on the account is 6%, compounded annually. How much does she need to invest today?

$336