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