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Exam 2 - SAMPLE QUESTIONS

Exam 2 - SAMPLE QUESTIONS - Name_Class_Date ID A...

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Name: ________________________ Class: ___________________ Date: __________ ID: A 1 ECON110 Interim Exam #3 ‐‐ SAMPLE QUESTIONS Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Imagine that someone offers you $100 today or $200 in 10 years. You would prefer to take the $100 today if the interest rate is a. 4 percent. b. 6 percent. c. 8 percent. d. All of the above are correct. ____ 2. What is the future value of $333 at an interest rate of 3 percent one year from today? ____ 3. Jorge deposited $1,000 into an account three years ago. The first two years he earned 5 percent interest; the third year he earned 6 percent interest. How much money does Jorge have in his account today? ____ 4. The price of a bond is equal to the sum of the present values of its future payments. Suppose a certain bond pays $50 one year from today and $1,050 two years from today. What is the price of the bond if the interest rate is 5 percent? ____ 5. At which interest rate is the present value of $35.00 two years from today equal to about $30.00 today? a. 5 percent b. 6 percent c. 7 percent d. 8 percent
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Name: ________________________ ID: A 2 ____ 6. You have a bond that entitles you to a one time payment of $10,000 one year from now. The interest rate is 10 percent per year. How much is the bond worth today? ____ 7. Mixster Concrete Company is considering buying a new cement truck. The owners and their accountants decide that this is the profitable thing to do. Before they can buy the truck, the interest rate and price of trucks change. In which case do these changes both make them less likely to buy the truck? ____ 8. Using the rule of 70, about how much would $100 be worth after 50 years if the interest rate were 7 percent? ____ 9. If you put $1,000 in the bank today at an interest rate of 6% what is its value in two years? a. $2,000(1.06) b. $1,000 + $(1.06) 2 c. $1,000(1.06) 2 d. None of the above are correct. ____ 10. What is the present value of a payment of $1,000 two years from now if the interest rate is 6%? ____ 11. Albert Einstein once referred to compounding as
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Name: ________________________ ID: A 3 Figure 27
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