INTERMEDIATE FINANCIAL MANAGEMENT 14TH
EDITION BY EUGENE BRIGHAM ACTUAL EXAM
QUESTIONS AND CORRECT ANSWERS
◉ Under which of the following conditions will a future value
calculated with simple interest exceed a future value calculated with
compound interest at the same rate?
A. The interest rate is very high.
B. The investment period is very long.
C. The compounding is annually.
D. This is not possible with positive interest rates.
Answer: D. This is not possible with positive interest rates.
◉ How much interest is earned in just the third year on a $1,000
deposit that earns 7% interest compounded annually?
,A. $70.00
B. $80.14
C. $105.62
D. $140.00.
Answer: B. $80.14
$1000.00 × (1.07)2 = $1,144.90 after 2 years
$1,144.90 × .07 = $80.14
◉ How much interest will be earned in the next year on an
investment paying 12% compounded annually if $100 was just
credited to the account for interest?
A. $88
B. $100
C. $112
,D. $200.
Answer: C. $112
The investment will again pay $100 plus interest on the previous
interest:
$100 × 1.12 = $112
◉ The concept of compound interest refers to:
A. earning interest on the original investment.
B. payment of interest on previously earned interest.
C. investing for a multiyear period of time.
D. determining the APR of the investment..
Answer: B. payment of interest on previously earned interest.
◉ When an investment pays only simple interest, this means:
, A. the interest rate is lower than on comparable investments.
B. the future value of the investment will be low.
C. the earned interest is nontaxable to the investor.
D. interest is earned only on the original investment..
Answer: D. interest is earned only on the original investment.
◉ Assume the total expense for your current year in college equals
$20,000. How much would your parents have needed to invest 21
years ago in an account paying 8% compounded annually to cover
this amount?
A. $952.46
B. $1,600.00
C. $1,728.08
EDITION BY EUGENE BRIGHAM ACTUAL EXAM
QUESTIONS AND CORRECT ANSWERS
◉ Under which of the following conditions will a future value
calculated with simple interest exceed a future value calculated with
compound interest at the same rate?
A. The interest rate is very high.
B. The investment period is very long.
C. The compounding is annually.
D. This is not possible with positive interest rates.
Answer: D. This is not possible with positive interest rates.
◉ How much interest is earned in just the third year on a $1,000
deposit that earns 7% interest compounded annually?
,A. $70.00
B. $80.14
C. $105.62
D. $140.00.
Answer: B. $80.14
$1000.00 × (1.07)2 = $1,144.90 after 2 years
$1,144.90 × .07 = $80.14
◉ How much interest will be earned in the next year on an
investment paying 12% compounded annually if $100 was just
credited to the account for interest?
A. $88
B. $100
C. $112
,D. $200.
Answer: C. $112
The investment will again pay $100 plus interest on the previous
interest:
$100 × 1.12 = $112
◉ The concept of compound interest refers to:
A. earning interest on the original investment.
B. payment of interest on previously earned interest.
C. investing for a multiyear period of time.
D. determining the APR of the investment..
Answer: B. payment of interest on previously earned interest.
◉ When an investment pays only simple interest, this means:
, A. the interest rate is lower than on comparable investments.
B. the future value of the investment will be low.
C. the earned interest is nontaxable to the investor.
D. interest is earned only on the original investment..
Answer: D. interest is earned only on the original investment.
◉ Assume the total expense for your current year in college equals
$20,000. How much would your parents have needed to invest 21
years ago in an account paying 8% compounded annually to cover
this amount?
A. $952.46
B. $1,600.00
C. $1,728.08
