Finance
Question 1
When you retire 40 years from now, you want to have $1.2 million. You think you can earn an average of 12 percent on your investment. To meet your goal, you are trying to decide whether to deposit lump sum today, or to wait and deposit a lump sum 2 years from today. How much more will you have to deposit as a lump sum if you wait for 2 years before making the deposit?
A)$1414.14 B)$2319.47 C)$2891.11 D)$3280.78 E)$3406.78
Question 2
Samantha opened a savings account this morning. Her money will earn 5 percent interest, compounded annually. After five years, her savings account will be worth $5000. Assume she will not make any withdrawals. Given this, which one of the following statements is true?
A) Samantha deposited more than $5600 this morning.
B) The present value of Samantha’s account is $5600
C) Samantha could have deposited less money and still had $5600 in five years if she could have earned 5.5 percent interest.
D) Samantha would have had to deposit more money to have $5600 in five years if she could have earned 6 percent interest
E) Samantha will earn an equal amount of interest every year for next five years
Question 3
Sara invested $500 six years ago at 5 percent interest. She spends her earnings as soon as she earns any interest so she only receives interest on her initial $500 investment. Which type of interest is Sara earning?
A) free market
B) complex interest
C) simple interest
D) interest on interest
E) compound interest
Question 4
You are depositing $1500 in a retirement account today and expect to earn an average return of 7.5 percent on this money. How much additional income will you earn if you leave the money invested for 45 years instead of just 40 years?
A)$10723.08 B) $11790.90 C)$12441.56 D)$12908.19 E) $13590.93
Question 5
Steve invested $100 two years ago at 10 percent interest. The first year, he earned $10 interest on his $100 investment. He reinvested the $10. The second year,
When you retire 40 years from now, you want to have $1.2 million. You think you can earn an average of 12 percent on your investment. To meet your goal, you are trying to decide whether to deposit lump sum today, or to wait and deposit a lump sum 2 years from today. How much more will you have to deposit as a lump sum if you wait for 2 years before making the deposit?
A)$1414.14 B)$2319.47 C)$2891.11 D)$3280.78 E)$3406.78
Question 2
Samantha opened a savings account this morning. Her money will earn 5 percent interest, compounded annually. After five years, her savings account will be worth $5000. Assume she will not make any withdrawals. Given this, which one of the following statements is true?
A) Samantha deposited more than $5600 this morning.
B) The present value of Samantha’s account is $5600
C) Samantha could have deposited less money and still had $5600 in five years if she could have earned 5.5 percent interest.
D) Samantha would have had to deposit more money to have $5600 in five years if she could have earned 6 percent interest
E) Samantha will earn an equal amount of interest every year for next five years
Question 3
Sara invested $500 six years ago at 5 percent interest. She spends her earnings as soon as she earns any interest so she only receives interest on her initial $500 investment. Which type of interest is Sara earning?
A) free market
B) complex interest
C) simple interest
D) interest on interest
E) compound interest
Question 4
You are depositing $1500 in a retirement account today and expect to earn an average return of 7.5 percent on this money. How much additional income will you earn if you leave the money invested for 45 years instead of just 40 years?
A)$10723.08 B) $11790.90 C)$12441.56 D)$12908.19 E) $13590.93
Question 5
Steve invested $100 two years ago at 10 percent interest. The first year, he earned $10 interest on his $100 investment. He reinvested the $10. The second year,