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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