FINA 5320 Ch.4 Questions with Correct
Answers
1 ) Thomas invests $ 111 in an account that pays 5 percent simple interest . How much
money will Thomas have at the end of 5 years A ) $ 133.201 B $ 144.30 C $ 134.92 D $
141.67 E $ 138.75
E.
2 ) Beatrice invests $ 1,350 in an account that pays 4 percent simple interest How much
more could she have earned over a 5 - year period if the interest had been compounded
annually ? A ) 32.73 B ) $ 112.41 C ) $ 26.18 D $ 18.92 ( E $ 22.48
E.
3 ) You can invest in an account that pays simple interest or an account that pays
compound interest either case you plan to invest $ 2,700 today and both accounts have
annual interest rate of 6 percent How much more interest will you receive in the 9th
year in the account that pays compound interest ? A ) $ 109.05 B ) 113.36 C ) 162.00
D)96.20 E ) 109.87
D
4 ) What is the future value of $ 3,058 invested for 10 years at 5.8 percent compounded
A) 4,069.97 B) 4053.83 C) 9,443.89 D) 9163.88 E) 5373.96
E
5 Five years from today you plan to invest $ 3,250 for 10 additional years at 5.5 percent
compounded annually How much will you have in your account 15 from today A ) $
7,255.55 B ) $ 5,937.92 C ) $ 4,481.24 D ) $ 5,551.47 E ) $ 6,055.15
D
, 6 ) Today your dream car costs $ 63,300 You feel that the price of the car will increase
at an annual rate 1.7 percent you plan to wait 7 years to buy the car , how much will it
cost at that 0 A ) 70,037.31 B ) 71,227.94 C ) $ 71,731.62 D ) $ 73,715.70 E $ 72,438.81 0
B
7 ) You are going to deposit $ 3,000 in an account that pays .56 percent interest per
quarter How much will you have in 6 years? A) 3434.08 B) 3430.26 C) 3449.47 D)
3411.16 E) 3426.26
B
8 ) You are going to deposit $ 4,200 in an account that pays .48 percent interest per
month . How much will you have in 5 years A ) 5,571.18 B 5,597.92 C ) $ 5,603.52 D ) $
5,624.7900032 E ) $ 5,557.21
B
9 ) Retirement Investment Advisors Incorporated has just offered you an annual
interest rate of 6 percent until you retire in 40 years You believe that interest rates will
increase over the next year and you would be offered 6.6 percent per year one year from
today . If you plan to deposit $ 18,000 into the account either this year or next year ,
how much more will you have when you retire if you wait one year make your deposit ?
A ) $ 32,529.54 B ) $ 22,866.08 C ) $ 12,219.43 D ) $ 49,213.56 E ) $ 48,043.26
A
10 ) You just purchased two coins at a price of $ 610 each Because one of the coins is
more collectible , you believe that its value will increase at a rate of 7 percent per year ,
while you believe the second coin will only increase at 6.4 percent per year . If you are
Answers
1 ) Thomas invests $ 111 in an account that pays 5 percent simple interest . How much
money will Thomas have at the end of 5 years A ) $ 133.201 B $ 144.30 C $ 134.92 D $
141.67 E $ 138.75
E.
2 ) Beatrice invests $ 1,350 in an account that pays 4 percent simple interest How much
more could she have earned over a 5 - year period if the interest had been compounded
annually ? A ) 32.73 B ) $ 112.41 C ) $ 26.18 D $ 18.92 ( E $ 22.48
E.
3 ) You can invest in an account that pays simple interest or an account that pays
compound interest either case you plan to invest $ 2,700 today and both accounts have
annual interest rate of 6 percent How much more interest will you receive in the 9th
year in the account that pays compound interest ? A ) $ 109.05 B ) 113.36 C ) 162.00
D)96.20 E ) 109.87
D
4 ) What is the future value of $ 3,058 invested for 10 years at 5.8 percent compounded
A) 4,069.97 B) 4053.83 C) 9,443.89 D) 9163.88 E) 5373.96
E
5 Five years from today you plan to invest $ 3,250 for 10 additional years at 5.5 percent
compounded annually How much will you have in your account 15 from today A ) $
7,255.55 B ) $ 5,937.92 C ) $ 4,481.24 D ) $ 5,551.47 E ) $ 6,055.15
D
, 6 ) Today your dream car costs $ 63,300 You feel that the price of the car will increase
at an annual rate 1.7 percent you plan to wait 7 years to buy the car , how much will it
cost at that 0 A ) 70,037.31 B ) 71,227.94 C ) $ 71,731.62 D ) $ 73,715.70 E $ 72,438.81 0
B
7 ) You are going to deposit $ 3,000 in an account that pays .56 percent interest per
quarter How much will you have in 6 years? A) 3434.08 B) 3430.26 C) 3449.47 D)
3411.16 E) 3426.26
B
8 ) You are going to deposit $ 4,200 in an account that pays .48 percent interest per
month . How much will you have in 5 years A ) 5,571.18 B 5,597.92 C ) $ 5,603.52 D ) $
5,624.7900032 E ) $ 5,557.21
B
9 ) Retirement Investment Advisors Incorporated has just offered you an annual
interest rate of 6 percent until you retire in 40 years You believe that interest rates will
increase over the next year and you would be offered 6.6 percent per year one year from
today . If you plan to deposit $ 18,000 into the account either this year or next year ,
how much more will you have when you retire if you wait one year make your deposit ?
A ) $ 32,529.54 B ) $ 22,866.08 C ) $ 12,219.43 D ) $ 49,213.56 E ) $ 48,043.26
A
10 ) You just purchased two coins at a price of $ 610 each Because one of the coins is
more collectible , you believe that its value will increase at a rate of 7 percent per year ,
while you believe the second coin will only increase at 6.4 percent per year . If you are
