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Several of the choices in the list of multiple choices assume that the problem is being worked by
using tables rather than a calculator.
In AGEC 424 you are expected to use a calculator and you
are expected to list your calculator inputs and outputs, which constitutes “showing your work.”
So, some of your answers will be a little different than the key due to the rounding involved when
using time value of money tables.
Timelines and listing calculator inputs and outputs will be emphasized in lab.
Multiple Choice Problems.
1.
How much must be invested today to have $1,000 in two years if the interest rate is 5%?
a.
$909.09
b.
$900.00
c.
$907.00
d.
$950.00
2.
Find the present value of $100 to be received at the end of two years if the discount rate is
12% compounded monthly.
a.
$66.50
b.
$78.76
c.
$68.80
d.
$91.80
e.
$79.75
3.
What is the rate of return on an investment if you lend $1,000 and are repaid $1,254.70 two
years later?
a.
12%
b.
25%
c.
6%
d.
18%
e.
4%
4.
Determine how much $1,000 deposited in a savings account paying 8% compounded
annually will be worth after 5 years.
a.
$5,526
b.
$784
c.
$1,400
d.
$1,469
5.
At an effective interest rate of 12%, a single sum invested today will double itself in
approximately:
a.
8 years.
b.
12 years.
c.
6 years.
d.
insufficient data to determine answer.
6.
Your bank balance is exactly $10,000. Three years ago you deposited $7,938 and have not
touched the account since. What annually compounded rate of interest has the bank been
paying?
1
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 Spring '08
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