FIN_3716_Quiz1_solution

FIN_3716_Quiz1_solution - 4. You own a classic automobile...

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FIN 3716 Quiz #1 – with solutions 1. The process of accumulating interest on an investment over time to earn more interest is called: a. growth. B . compounding. c. aggregation. d. accumulation. e. discounting. 2. As the discount rate increases, the present value of $2,000 to be received four years from now: a. remains constant. b. also increases. C . decreases. d. becomes negative. e. cannot determine 3. Frank invests $2,500 in an account that pays 6 percent simple interest. How much money will he have at the end of four years? a. $2,650 B . $3,100 c. $3,156 d. $3,163 e. $10,600 Ending value = $2,500 + ($2,500 .06 4) = $3,100.00
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Unformatted text preview: 4. You own a classic automobile that is currently valued at $67,900. If the value increases by 8 percent annually, how much will the automobile be worth 15 years from now? a. $199,801.33 b. $212,524.67 c. $214,740.01 D . $215,390.28 e. $218,887.79 Future value = $67,900 (1 + .08) 15 = $215,390.28 5. You would like to give your daughter $50,000 towards her college education 15 years from now. How much money must you set aside today for this purpose if you can earn 9 percent on your investments? a. $12,250.00 b. $12,989.47 C . $13,726.90 d. $14,008.50 e. $14,211.11 Present value = $50,000 [1 / (1 + .09) 15 ] = $13,726.90...
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FIN_3716_Quiz1_solution - 4. You own a classic automobile...

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