, App_C
Student: ___________________________________________________________________________
1. The value of $1 today is worth more than $1 one year from now.
True False
2. The time value of money is a concept which means that the value of $1 increases over time.
True False
3. Simple interest is interest earned on the initial investment only.
True False
4. If you put $500 into a savings account that pays simple interest of 8% per year and then withdraw the
money two years later, you will earn interest of $80.
True False
5. If you put $600 into a savings account that pays simple interest of 10% per year and then withdraw the
money two years later, you will earn interest of $126.
True False
6. Compound interest is interest you earn on the initial investment and on previous interest.
True False
7. If you put $200 into a savings account that pays annual compound interest of 8% per year and then
withdraw the money two years later, you will earn interest of $32.
True False
8. If you put $300 into a savings account that pays annual compound interest of 10% per year and then
withdraw the money two years later, you will earn interest of $63.
True False
9. Future value is how much an amount today will grow to be in the future.
True False
10. The more frequent the rate of compounding, the more interest that is earned on previous interest, resulting
in a higher future value.
True False
11. Present value indicates how much a present amount of money will grow to in the future.
True False
,12. The discount rate is the rate at which someone is willing to give up current dollars for future dollars.
True False
13. An annuity is a series of equal cash payments over equal time intervals.
True False
14. The future value of $1,000 invested today for three years that earns 10% compounded annually is greater
than the future value of a $500 annuity with the same interest rate over the same period.
True False
15. The present value of $1,000 received three years from today with a discount rate of 10% is less than the
present value of a $500 annuity with the same discount rate over the same period.
True False
16. The concept that interest causes the value of money received today to be greater than the value of that same
amount of money received in the future is referred to as the:
A. Monetary unit assumption.
B. Historical cost principle.
C. Time value of money.
D. Matching principle.
17. The value today of receiving an amount in the future is referred to as the:
A. Future value of a single amount.
B. Present value of a single amount.
C. Future value of an annuity.
D. Present value of an annuity.
18. The value that an amount today will grow to in the future is referred to as the:
A. Future value of a single amount.
B. Present value of a single amount.
C. Future value of an annuity.
D. Present value of an annuity.
19. Reba wishes to know how much would be in her savings account in five years if she deposits a given sum
in an account that earns 6% interest. She should use a table for the:
A. Future value of $1.
B. Present value of $1.
C. Future value of an annuity of $1.
D. Present value of an annuity of $1.
20. LeAnn wishes to know how much she should set aside now at 7% interest in order to accumulate a sum of
$5,000 in four years. She should use a table for the:
A. Future value of $1.
B. Present value of $1.
C. Future value of an annuity of $1.
D. Present value of an annuity of $1.
, 21. Samuel is trying to determine what it's worth today to receive $10,000 in four years at a 7% interest rate.
He should use a table for the:
A. Future value of $1.
B. Present value of $1.
C. Future value of an annuity of $1.
D. Present value of an annuity of $1.
22. Below are excerpts from interest tables for 8% interest.
Column 2 is an interest table for the:
A. Future value of $1.
B. Present value of $1.
C. Future value of an annuity of $1.
D. Present value of an annuity of $1.
23. Below are excerpts from interest tables for 8% interest.
Column 3 is an interest table for the:
A. Future value of $1.
B. Present value of $1.
C. Future value of an annuity of $1.
D. Present value of an annuity of $1.
24. How much will $25,000 grow to in seven years, assuming an interest rate of 12% compounded annually?
A. $55,267.
B. $46,000.
C. $61,899.
D. $52,344.
25. How much will $8,000 grow to in five years, assuming an interest rate of 8% compounded quarterly?
A. $10,989.
B. $11,755.
C. $11,888.
D. $12,013.
Student: ___________________________________________________________________________
1. The value of $1 today is worth more than $1 one year from now.
True False
2. The time value of money is a concept which means that the value of $1 increases over time.
True False
3. Simple interest is interest earned on the initial investment only.
True False
4. If you put $500 into a savings account that pays simple interest of 8% per year and then withdraw the
money two years later, you will earn interest of $80.
True False
5. If you put $600 into a savings account that pays simple interest of 10% per year and then withdraw the
money two years later, you will earn interest of $126.
True False
6. Compound interest is interest you earn on the initial investment and on previous interest.
True False
7. If you put $200 into a savings account that pays annual compound interest of 8% per year and then
withdraw the money two years later, you will earn interest of $32.
True False
8. If you put $300 into a savings account that pays annual compound interest of 10% per year and then
withdraw the money two years later, you will earn interest of $63.
True False
9. Future value is how much an amount today will grow to be in the future.
True False
10. The more frequent the rate of compounding, the more interest that is earned on previous interest, resulting
in a higher future value.
True False
11. Present value indicates how much a present amount of money will grow to in the future.
True False
,12. The discount rate is the rate at which someone is willing to give up current dollars for future dollars.
True False
13. An annuity is a series of equal cash payments over equal time intervals.
True False
14. The future value of $1,000 invested today for three years that earns 10% compounded annually is greater
than the future value of a $500 annuity with the same interest rate over the same period.
True False
15. The present value of $1,000 received three years from today with a discount rate of 10% is less than the
present value of a $500 annuity with the same discount rate over the same period.
True False
16. The concept that interest causes the value of money received today to be greater than the value of that same
amount of money received in the future is referred to as the:
A. Monetary unit assumption.
B. Historical cost principle.
C. Time value of money.
D. Matching principle.
17. The value today of receiving an amount in the future is referred to as the:
A. Future value of a single amount.
B. Present value of a single amount.
C. Future value of an annuity.
D. Present value of an annuity.
18. The value that an amount today will grow to in the future is referred to as the:
A. Future value of a single amount.
B. Present value of a single amount.
C. Future value of an annuity.
D. Present value of an annuity.
19. Reba wishes to know how much would be in her savings account in five years if she deposits a given sum
in an account that earns 6% interest. She should use a table for the:
A. Future value of $1.
B. Present value of $1.
C. Future value of an annuity of $1.
D. Present value of an annuity of $1.
20. LeAnn wishes to know how much she should set aside now at 7% interest in order to accumulate a sum of
$5,000 in four years. She should use a table for the:
A. Future value of $1.
B. Present value of $1.
C. Future value of an annuity of $1.
D. Present value of an annuity of $1.
, 21. Samuel is trying to determine what it's worth today to receive $10,000 in four years at a 7% interest rate.
He should use a table for the:
A. Future value of $1.
B. Present value of $1.
C. Future value of an annuity of $1.
D. Present value of an annuity of $1.
22. Below are excerpts from interest tables for 8% interest.
Column 2 is an interest table for the:
A. Future value of $1.
B. Present value of $1.
C. Future value of an annuity of $1.
D. Present value of an annuity of $1.
23. Below are excerpts from interest tables for 8% interest.
Column 3 is an interest table for the:
A. Future value of $1.
B. Present value of $1.
C. Future value of an annuity of $1.
D. Present value of an annuity of $1.
24. How much will $25,000 grow to in seven years, assuming an interest rate of 12% compounded annually?
A. $55,267.
B. $46,000.
C. $61,899.
D. $52,344.
25. How much will $8,000 grow to in five years, assuming an interest rate of 8% compounded quarterly?
A. $10,989.
B. $11,755.
C. $11,888.
D. $12,013.
