Financial
Management
Trainor
Name
1. If you place $100 in the bank today and 5 years from now it grows to $150, what rate of interest are you earning each year?
a. 5.0%
b. 8.45%
c. 9.32%
d. 10.0%
e. None of the above
2. Suppose you need $12,000 for a new car that you plan to buy 5 years from now. How much should you put in the bank today if you can earn 7% per year? Round to the nearest dollar.
a. $8,350
b. $8,556
c. $9,233
d. $10,000
e. None of the above
3. If you put $10,000 in the market today and the market falls 15% this year and 15% the year after, how much do you have left? Round to nearest dollar.
a. $7,000
b. $7,200
c. $7,225
d. $8,500
e. None of the above
4. Suppose you put $500 in a asset that pays 12% at the end of each year. How much would you have at the end of 20 years? Round to nearest dollar.
a. $1,700
b. $1,000
c. $1,200
d. $4,000
e. None of the above
5. Assume you want to buy a new car priced at $15,000. If you can get a 9% simple annual interest rate for a 5 year loan, what would be your monthly payment?
a. $222.52
b. $311.37
c. $332.22
d. $357.26
e. None of the above
6. Assume you want to buy an $80,000 home. You can attain a 30 year mortgage at a simple annual interest rate of 8%. What is your monthly payment? Round to nearest dollar.
a. $587
b. $617
c. $805
d. $815
e. None of the above
7. Looking at the same question above. Assume you buy the $80,000 home but only want a 20 year mortgage. How much is your monthly payment with a 8% simple annual interest rate? Round to nearest dollar,
a. $587
b. $617
c. $702
d. $1,127
e. None of the above
8. Your hoping to retire in 20 years with a million dollars. If you can earn 10% per year, how much should you invest at the end of each year in your retirement plan? Round to nearest dollar.
a. $17,460
b. $14,864
c. $7,460
d. $4,864
e. None of the above
9. When you win a $1,000,000 in the lottery, you don=t receive the million all at once, but rather $50,000 per year for 20 years. At a 9% interest rate, how much is this really worth today? Round to nearest dollar. Remember the first payment occurs right away.
a. $1,000,000
b. $526,256
c. $500,000
d. $456,427
e. None of the above
10. If a bank tells you they are going to charge you an 8% simple annual interest rate on a loan that is compounded weekly, what is the effective annual interest rate?
a. 8.0%
b. 8.22%
c. 8.32%
d. 9.11%
e. None of the above
11. Which of the following options would earn you the most money?
a. 26% compounded yearly
b. 24% compounded monthly
c. 20.8% compounded weekly
12. Your hoping to retire in 30 years with a million dollars. If you can earn 9% per year, how much should you invest in your retirement plan if you start right now? Round to nearest dollar.
a. $4,864.27
b. $7,996.62
c. $6,730.60
d. $7,336.35
e. None of the above
13. Your hoping to retire in 30 years with a million dollars. If you can earn 9% per year, how much should you invest at the end of each year in your retirement plan? Round to nearest dollar.
a. $4,864.27
b. $7,996.62
c. $6,730.60
d. $7,336.35
e. None of the above
14. The future value of $1,000 at 5% one hundred years from now is
a. $131,501.25
b. $500,000.00
c. $82,407.85
d. $105,000.00
e. None of the above
15. How long would it take for $1 to grow into $8 if you could earn 20% a year?
A. 40 years
b. 20 years
c. 11.41 years
d. 8.74 years
e. None of the above
16. Assume you want to buy a $140,000 home. You can attain a 30 year mortgage at a simple annual interest rate of 7.2%. What is your monthly payment? Round to nearest dollar.
a. $937.87
b. $1,027.44
c. $805.72
d. $950.30
e. None of the above
17. If you offer to pay a bank $200 at the end of each month for the next 30 years, how much should they lend you if their interest rates are at 6%?
A. $26,728
B. $57,032
C. $72,000
D. $41,756
E. None of the above
18. If you put $2,000 away at the end of each year, how long would it take you to accumulate $200,000 if you could earn 8%?
A. 28.55 years
B. 38.9 years
C. 27.02 years
D. 20 years
E. None of the above
19. What rate of interest are you earning if your $10 grows to $20 in 2 years?
A. 10%
B. 50%
C. 100%
D. 200%
E. None of the above
20. The difference between an annuity and annuity due is
A. Annuity starts payments now while annuity due starts payments at the end of the period.
B. Annuity starts payments at the end of the period while annuity due starts payments right now.
C. Both start payments right now but annuity due means you get paid later.
D. Both start payments right now but annuity due means you get paid right now.
For the next 2 questions, specify which formula you would use to find the unknown.
21. What type of question is the following? If you put $10 in the bank every month for the next 30 years starting now, and end up with $20,000, what rate of interest did you earn?
A. Annuity
B. Annuity Due
C. Fixed Sum
22. What type of question is the following? You are going to receive $100 every month starting at the beginning of the month for the next 60 months? If the annual interest rate is 10%, how much is this worth to you now?
A. Annuity
B. Annuity Due
C. Fixed Sum
Answers:
1. b 11. b 21. b
2. b 12. c 22. b
3. c 13. d
4. e, 4,823 14. a
5. b 15. c
6. a 16. d
7. e, 669 17. e, 33,358
8. a 18. a
9. e, 497,505 19. e, 41%
10. c 20. b