FINANCE 325 EXAM 1 QUESTIONS
AND ANSWERS 2026 - 2027
If you deposit $4,000 today in an account paying 11% per year. How
much will you have in 5 years? - ANSWERS-FVt = PV * (1 + r)t
so
FV5 = $4,000 * (1+.11)5
FV5 =
Using TVM:
PV = -4000 , r(I/Y) = .11 , t(N) = 5
FV = $?
Suppose you invest $2,000 in ABC stock today. ABC stock does not pay
any dividends, but you expect to earn an annual return of 7% per year.
What will be the value of your investment in 8 years?
PV=
I/Y=
N=
FV= - ANSWERS-FV = $2633.62
Suppose you need $25,000 in 4 years for a down payment on a house. If
you can earn 7.5% on your money, how much do you need today?
FV=
I/Y=
N=
PV= - ANSWERS-PV = $21,576.83
What is the present value of $500 to be received in 10 years? Assume
the appropriate discount rate is 3%.
FV=
I/Y=
N=
PV= - ANSWERS-PV = $372.05
, Suppose GM Corporation promises to pay all its employees a bonus of
$100 in 2 years. GM has about 173,000 employees. What is the present
value of that obligation, assuming an appropriate discount rate of 5% per
year?
FV=
I/Y=
N=
PV= - ANSWERS-FV of obligation = 173,000*100 = 17,300,000
PV = $15,691,609.98
Suppose you deposit $5000 today in an account paying r percent per
year. If you will get $10,000 in 10 years, what rate of return are you
being offered?
FV=
I/Y=
N=
PV= - ANSWERS-r(I/Y) = 7.18%
Suppose you plan to buy a house in 5 years. You estimate you will need
a down payment of $40,000. If you currently have $25,000, what annual
rate of interest must you earn to have enough for a down payment?
FV=
I/Y=
N=
PV= - ANSWERS-r(I/Y) = 9.86%
Suppose we invest $5,000 in a security earning 8% per year. Determine
how many years it will take for the investment to be worth $10,000.
FV=
I/Y=
N=
PV= - ANSWERS-N = 9.01 years
Suppose you have $2000. You would like to buy a new mountain bike,
but the bike you have in mind costs $3500. If you can earn 6% per year,
how long until you can afford the bike you want?
AND ANSWERS 2026 - 2027
If you deposit $4,000 today in an account paying 11% per year. How
much will you have in 5 years? - ANSWERS-FVt = PV * (1 + r)t
so
FV5 = $4,000 * (1+.11)5
FV5 =
Using TVM:
PV = -4000 , r(I/Y) = .11 , t(N) = 5
FV = $?
Suppose you invest $2,000 in ABC stock today. ABC stock does not pay
any dividends, but you expect to earn an annual return of 7% per year.
What will be the value of your investment in 8 years?
PV=
I/Y=
N=
FV= - ANSWERS-FV = $2633.62
Suppose you need $25,000 in 4 years for a down payment on a house. If
you can earn 7.5% on your money, how much do you need today?
FV=
I/Y=
N=
PV= - ANSWERS-PV = $21,576.83
What is the present value of $500 to be received in 10 years? Assume
the appropriate discount rate is 3%.
FV=
I/Y=
N=
PV= - ANSWERS-PV = $372.05
, Suppose GM Corporation promises to pay all its employees a bonus of
$100 in 2 years. GM has about 173,000 employees. What is the present
value of that obligation, assuming an appropriate discount rate of 5% per
year?
FV=
I/Y=
N=
PV= - ANSWERS-FV of obligation = 173,000*100 = 17,300,000
PV = $15,691,609.98
Suppose you deposit $5000 today in an account paying r percent per
year. If you will get $10,000 in 10 years, what rate of return are you
being offered?
FV=
I/Y=
N=
PV= - ANSWERS-r(I/Y) = 7.18%
Suppose you plan to buy a house in 5 years. You estimate you will need
a down payment of $40,000. If you currently have $25,000, what annual
rate of interest must you earn to have enough for a down payment?
FV=
I/Y=
N=
PV= - ANSWERS-r(I/Y) = 9.86%
Suppose we invest $5,000 in a security earning 8% per year. Determine
how many years it will take for the investment to be worth $10,000.
FV=
I/Y=
N=
PV= - ANSWERS-N = 9.01 years
Suppose you have $2000. You would like to buy a new mountain bike,
but the bike you have in mind costs $3500. If you can earn 6% per year,
how long until you can afford the bike you want?
