exam
Question 1
(5 points) $50 today is worth MORE than $50 tomorrow.
Your Answer Score Explanation True
✔ 5.00 Correct. You understand Time value of money. False Total 5.00 / 5.00
Question Explanation
We have assumed time value of money is positive.
Question 2
(5 points) At an interest rate of 10% it is better to have $100 today than $120 in 2 years.
Your Answer Score Explanation True
✔ 5.00 Correct; it is compounding! False Total 5.00 / 5.00
Question Explanation
All about compounding!
Question 3
(5 points) Shawn wants to buy a new telescope. He estimates that it will take him one year to save the money and that the telescope will cost $200. At an interest rate of 6%, how much does Shawn need to set aside today to purchase the telescope in one year? (Enter just the number without the $ sign or a comma)
Answer for Question 3
You entered: Your Answer Score Explanation
189 ✔ 5.00 Correct, You know it has to be less than $200.
Total 5.00 / 5.00
Question Explanation
Simple PV calculation.
Question 4
(10 points) Johnny and Darren both earn $100 working on their respective neighbors' big farms. Johnny puts his $100 in the piggy bank that his parents gave him to encourage him to save. Darren puts his money in a savings account his parents set up for him. The savings account pays 3% interest. They both take their money out after 5 years. How much more money does Darren have than Johnny?
Your Answer Score Explanation 16
✔ 10.00 Correct. You know how to calculate FV and intuitively know that the interest has to be only slightly more than $15 because the interest rate is low. 3 19 10 Total 10.00 / 10.00
Question Explanation
A simple future value calculation. You should see that Darren will earn at least $15 even without compounding.
Question 5
(10 points) Your dad invested $25 for you in 1942 in a fund and you have not withdrawn any money since.If the fund has averaged a return of 8 percent
(5 points) $50 today is worth MORE than $50 tomorrow.
Your Answer Score Explanation True
✔ 5.00 Correct. You understand Time value of money. False Total 5.00 / 5.00
Question Explanation
We have assumed time value of money is positive.
Question 2
(5 points) At an interest rate of 10% it is better to have $100 today than $120 in 2 years.
Your Answer Score Explanation True
✔ 5.00 Correct; it is compounding! False Total 5.00 / 5.00
Question Explanation
All about compounding!
Question 3
(5 points) Shawn wants to buy a new telescope. He estimates that it will take him one year to save the money and that the telescope will cost $200. At an interest rate of 6%, how much does Shawn need to set aside today to purchase the telescope in one year? (Enter just the number without the $ sign or a comma)
Answer for Question 3
You entered: Your Answer Score Explanation
189 ✔ 5.00 Correct, You know it has to be less than $200.
Total 5.00 / 5.00
Question Explanation
Simple PV calculation.
Question 4
(10 points) Johnny and Darren both earn $100 working on their respective neighbors' big farms. Johnny puts his $100 in the piggy bank that his parents gave him to encourage him to save. Darren puts his money in a savings account his parents set up for him. The savings account pays 3% interest. They both take their money out after 5 years. How much more money does Darren have than Johnny?
Your Answer Score Explanation 16
✔ 10.00 Correct. You know how to calculate FV and intuitively know that the interest has to be only slightly more than $15 because the interest rate is low. 3 19 10 Total 10.00 / 10.00
Question Explanation
A simple future value calculation. You should see that Darren will earn at least $15 even without compounding.
Question 5
(10 points) Your dad invested $25 for you in 1942 in a fund and you have not withdrawn any money since.If the fund has averaged a return of 8 percent