FIN 281 CH.3 (Quiz)
Elena earned $400 from babysitting last year. She put the whole amount in the bank. This year her account had grown to $409. What interest rate did her account earn?
2.3% N: 1 I/Y= 2.3 PV: -400 PMT: 0 FV: 409 compounded annually (1)
Tracy just took out a loan for her new(wish) car. Her monthly payments are $352.42 for three years. Assuming the interest rate is 6,07%, how much did she borrow for the car?
$11,572 N: 3 x 12 =36 I/Y: 6.07/12 - 0.505833333 PV= -11,572 PMT: 352.42 FV:0 compounding annually if multiply N by 12 and divide I/Y by 12
Jerald has been investing $1,600 per year for the past 7 years. Since his account has grown at 8.8% per year during that time, he can expect the account to have ____ in it.
$14,631 N: 7 I/Y: 8.8 PV:0 PMT: -1,600 FV= 14631 compounding annually (1)
Gernard's band made $700 last weekend. His cut was $233. He put the money in an account that earns 4%. If he were to withdraw the money in 2 years, how much will he be able to withdraw from the account?
$252.01 N: 2 I/Y: 4 PV: -233 PMT:0 FV= 252.01 compounded annually (1)
Spencer put $500 in a bank account that paid simple interest rate at 5% annually. How much interest did he earn in year 3?
Simple interest is the same amount each year since there is no compounding. $500 x 5% = $25
Ten years ago, Earl's parents threw him a big birthday party with lots of friends from school. He took all the money from his birthday cards and put it in a bank account that paid 8% interest. When he withdrew the money this week, there was $1,441 in the account. How much did he received in birthday money ten years ago?
$667 N:10 I/Y: 8 PV= -667 PMT:0 FV: 1,441 compounding annually (1)
Patty is planning a nice tropical vacation for next summer. She is saving $250 per month, at 1.5%, for the next ten moths so she can pay cash for her trip. What type of TVM problem is this?
Future value of an annuity
bryon just started a new job and received a $3,000 signing bonus. He deposited the full amount and left it in the bank for five years, earning 1.9% per year. This type of time value of money category is classified as:
a lump sum
Heather makes and sell jewelry. She always saves the first $200 she sells each month in an account that earns 3% interest. To calculate how much she will have in the account at the end of three years, she would be solving for:
future value of an annuity
Cedric invested $1,500 and let it earn interest at 2.4% for seven years. When he withdrew his money, there was $1,752 in the account. This account:
paid simple interest 2.4% x $1,500= $36 annual interest. $36 annual interest x 7 years= $252 in interest $1,500 invested + $252 in simple interest = $1,752
Franklin invested his $4,000 bonus at work in an account that had the potential to earn cup to 10% compounded annually. He asked his advisor how risky the investment was because he was more concerned about protecting his $4,000 investment that about earning much interest. In other words, he really wanted to protect his:
principal
Leslie could invest some money for a few years. Despite only investing $1,000, Leslie was surprised to see that his money had grown to $3,000 in just eight years. Leslie was surprised because he didn't;y understand the concept of:
time value of money