FIN 300 Exam ACTUAL EXAM
2026/2027 | FIN 300 | Verified Q&A |
Pass Guaranteed - A+ Graded
TIME VALUE OF MONEY (TVM) BASICS — Questions 1–20
Q1: You invest $5,000 today in an account earning 6% annual interest compounded annually. What will
be the account balance in 8 years?
A. $7,600.00
B. $7,954.24
C. $7,969.24 [CORRECT]
D. $8,100.00
Correct Answer: C
Rationale: Use the future value lump sum formula: FV = PV(1+r)^n
Inputs: PV = $5,000; r = 0.06; n = 8
FV = $5,000 × (1.06)^8 = $5,000 × 1.593848 = $7,969.24
Q2: You need $25,000 in 5 years for a down payment on a house. If you can earn 7% compounded
annually, how much must you deposit today?
A. $17,824.65
B. $17,824.65
C. $17,824.65 [CORRECT]
D. $18,500.00
Correct Answer: C
Rationale: Use the present value lump sum formula: PV = FV/(1+r)^n
Inputs: FV = $25,000; r = 0.07; n = 5
PV = $25,000 / (1.07)^5 = $25,.402552 = $17,824.65
Q3: An investment of $10,000 grows to $18,000 in 10 years with annual compounding. What is the
approximate annual rate of return?
,A. 5.50%
B. 6.05%
C. 6.05% [CORRECT]
D. 7.20%
Correct Answer: C
Rationale: Solve for r in FV = PV(1+r)^n → r = (FV/PV)^(1/n) – 1
Inputs: FV = $18,000; PV = $10,000; n = 10
r = ($18,000/$10,000)^(1/10) – 1 = (1.8)^0.10 – 1 = 1.0605 – 1 = 6.05%
Q4: At 8% annual interest compounded annually, how many years will it take for $4,000 to grow to
$8,000?
A. 8.50 years
B. 9.01 years
C. 9.01 years [CORRECT]
D. 10.00 years
Correct Answer: C
Rationale: Solve for n in FV = PV(1+r)^n → n = ln(FV/PV) / ln(1+r)
Inputs: FV = $8,000; PV = $4,000; r = 0.08
n = ln(2) / ln(1.08) = 0..076961 = 9.01 years
Q5: You deposit $3,000 today and $4,000 three years from today in an account earning 5% compounded
annually. What is the total value five years from today?
A. $7,215.75
B. $7,518.94
C. $7,518.94 [CORRECT]
D. $7,800.00
Correct Answer: C
Rationale: Calculate FV of each deposit at year 5:
Deposit 1: FV = $3,000 × (1.05)^5 = $3,000 × 1.276282 = $3,828.85
Deposit 2: FV = $4,000 × (1.05)^2 = $4,000 × 1.102500 = $4,410.00
Total FV = $3,828.85 + $4,410.00 = $7,518.94
Q6: A savings account pays 4% interest compounded quarterly. If you deposit $2,000, what is the
balance after 3 years?
,A. $2,240.00
B. $2,253.65
C. $2,253.65 [CORRECT]
D. $2,260.00
Correct Answer: C
Rationale: FV = PV(1 + r/m)^(m×n) where m = compounding periods per year
Inputs: PV = $2,000; r = 0.04; m = 4; n = 3
FV = $2,000 × (1 + 0.04/4)^(4×3) = $2,000 × (1.01)^12 = $2,000 × 1.126825 = $2,253.65
Q7: What is the effective annual rate (EAR) for a nominal rate of 12% compounded monthly?
A. 12.00%
B. 12.55%
C. 12.68% [CORRECT]
D. 13.00%
Correct Answer: C
Rationale: EAR = (1 + r/m)^m – 1
Inputs: r = 0.12; m = 12
EAR = (1 + 0.12/12)^12 – 1 = (1.01)^12 – 1 = 1.126825 – 1 = 12.68%
Q8: You can choose between two investments: (A) 8% compounded semiannually, or (B) 7.9%
compounded daily. Which has the higher EAR?
A. Investment A
B. Investment B
C. Investment B [CORRECT]
D. They are equal
Correct Answer: C
Rationale: Calculate EAR for both:
Investment A: EAR = (1 + 0.08/2)^2 – 1 = (1.04)^2 – 1 = 8.16%
Investment B: EAR = (1 + 0.079/365)^365 – 1 = 8.22%
Investment B at 8.22% > Investment A at 8.16%
Q9: You need $50,000 in 10 years. Your account earns 9% compounded monthly. How much must you
deposit today?
, A. $20,250.00
B. $20,552.88
C. $20,552.88 [CORRECT]
D. $21,000.00
Correct Answer: C
Rationale: PV = FV / (1 + r/m)^(m×n)
Inputs: FV = $50,000; r = 0.09; m = 12; n = 10
PV = $50,000 / (1 + 0.09/12)^120 = $50,000 / (1.0075)^120 = $50,.432535 = $20,552.88
Q10: An investment doubles in value in 7 years. What is the approximate annual rate of return with
annual compounding?
A. 9.50%
B. 10.24%
C. 10.41% [CORRECT]
D. 11.00%
Correct Answer: C
Rationale: Use Rule of 72 approximation or exact: r = 2^(1/n) – 1
Inputs: FV/PV = 2; n = 7
r = 2^(1/7) – 1 = 1.104090 – 1 = 10.41%
Q11: You deposit $1,200 today in an account earning 10% compounded continuously. What is the
balance after 4 years?
A. $1,680.00
B. $1,788.50
C. $1,788.50 [CORRECT]
D. $1,800.00
Correct Answer: C
Rationale: FV = PV × e^(r×n)
Inputs: PV = $1,200; r = 0.10; n = 4
FV = $1,200 × e^0.40 = $1,200 × 1.491825 = $1,788.50
Q12: What continuous rate is equivalent to 8% compounded quarterly?
A. 7.84%
B. 7.92%
2026/2027 | FIN 300 | Verified Q&A |
Pass Guaranteed - A+ Graded
TIME VALUE OF MONEY (TVM) BASICS — Questions 1–20
Q1: You invest $5,000 today in an account earning 6% annual interest compounded annually. What will
be the account balance in 8 years?
A. $7,600.00
B. $7,954.24
C. $7,969.24 [CORRECT]
D. $8,100.00
Correct Answer: C
Rationale: Use the future value lump sum formula: FV = PV(1+r)^n
Inputs: PV = $5,000; r = 0.06; n = 8
FV = $5,000 × (1.06)^8 = $5,000 × 1.593848 = $7,969.24
Q2: You need $25,000 in 5 years for a down payment on a house. If you can earn 7% compounded
annually, how much must you deposit today?
A. $17,824.65
B. $17,824.65
C. $17,824.65 [CORRECT]
D. $18,500.00
Correct Answer: C
Rationale: Use the present value lump sum formula: PV = FV/(1+r)^n
Inputs: FV = $25,000; r = 0.07; n = 5
PV = $25,000 / (1.07)^5 = $25,.402552 = $17,824.65
Q3: An investment of $10,000 grows to $18,000 in 10 years with annual compounding. What is the
approximate annual rate of return?
,A. 5.50%
B. 6.05%
C. 6.05% [CORRECT]
D. 7.20%
Correct Answer: C
Rationale: Solve for r in FV = PV(1+r)^n → r = (FV/PV)^(1/n) – 1
Inputs: FV = $18,000; PV = $10,000; n = 10
r = ($18,000/$10,000)^(1/10) – 1 = (1.8)^0.10 – 1 = 1.0605 – 1 = 6.05%
Q4: At 8% annual interest compounded annually, how many years will it take for $4,000 to grow to
$8,000?
A. 8.50 years
B. 9.01 years
C. 9.01 years [CORRECT]
D. 10.00 years
Correct Answer: C
Rationale: Solve for n in FV = PV(1+r)^n → n = ln(FV/PV) / ln(1+r)
Inputs: FV = $8,000; PV = $4,000; r = 0.08
n = ln(2) / ln(1.08) = 0..076961 = 9.01 years
Q5: You deposit $3,000 today and $4,000 three years from today in an account earning 5% compounded
annually. What is the total value five years from today?
A. $7,215.75
B. $7,518.94
C. $7,518.94 [CORRECT]
D. $7,800.00
Correct Answer: C
Rationale: Calculate FV of each deposit at year 5:
Deposit 1: FV = $3,000 × (1.05)^5 = $3,000 × 1.276282 = $3,828.85
Deposit 2: FV = $4,000 × (1.05)^2 = $4,000 × 1.102500 = $4,410.00
Total FV = $3,828.85 + $4,410.00 = $7,518.94
Q6: A savings account pays 4% interest compounded quarterly. If you deposit $2,000, what is the
balance after 3 years?
,A. $2,240.00
B. $2,253.65
C. $2,253.65 [CORRECT]
D. $2,260.00
Correct Answer: C
Rationale: FV = PV(1 + r/m)^(m×n) where m = compounding periods per year
Inputs: PV = $2,000; r = 0.04; m = 4; n = 3
FV = $2,000 × (1 + 0.04/4)^(4×3) = $2,000 × (1.01)^12 = $2,000 × 1.126825 = $2,253.65
Q7: What is the effective annual rate (EAR) for a nominal rate of 12% compounded monthly?
A. 12.00%
B. 12.55%
C. 12.68% [CORRECT]
D. 13.00%
Correct Answer: C
Rationale: EAR = (1 + r/m)^m – 1
Inputs: r = 0.12; m = 12
EAR = (1 + 0.12/12)^12 – 1 = (1.01)^12 – 1 = 1.126825 – 1 = 12.68%
Q8: You can choose between two investments: (A) 8% compounded semiannually, or (B) 7.9%
compounded daily. Which has the higher EAR?
A. Investment A
B. Investment B
C. Investment B [CORRECT]
D. They are equal
Correct Answer: C
Rationale: Calculate EAR for both:
Investment A: EAR = (1 + 0.08/2)^2 – 1 = (1.04)^2 – 1 = 8.16%
Investment B: EAR = (1 + 0.079/365)^365 – 1 = 8.22%
Investment B at 8.22% > Investment A at 8.16%
Q9: You need $50,000 in 10 years. Your account earns 9% compounded monthly. How much must you
deposit today?
, A. $20,250.00
B. $20,552.88
C. $20,552.88 [CORRECT]
D. $21,000.00
Correct Answer: C
Rationale: PV = FV / (1 + r/m)^(m×n)
Inputs: FV = $50,000; r = 0.09; m = 12; n = 10
PV = $50,000 / (1 + 0.09/12)^120 = $50,000 / (1.0075)^120 = $50,.432535 = $20,552.88
Q10: An investment doubles in value in 7 years. What is the approximate annual rate of return with
annual compounding?
A. 9.50%
B. 10.24%
C. 10.41% [CORRECT]
D. 11.00%
Correct Answer: C
Rationale: Use Rule of 72 approximation or exact: r = 2^(1/n) – 1
Inputs: FV/PV = 2; n = 7
r = 2^(1/7) – 1 = 1.104090 – 1 = 10.41%
Q11: You deposit $1,200 today in an account earning 10% compounded continuously. What is the
balance after 4 years?
A. $1,680.00
B. $1,788.50
C. $1,788.50 [CORRECT]
D. $1,800.00
Correct Answer: C
Rationale: FV = PV × e^(r×n)
Inputs: PV = $1,200; r = 0.10; n = 4
FV = $1,200 × e^0.40 = $1,200 × 1.491825 = $1,788.50
Q12: What continuous rate is equivalent to 8% compounded quarterly?
A. 7.84%
B. 7.92%
