CHAPTER 2

A higher market interest rate:

• Increases the future value of current money,

• Increases the present value of future money,

• Maintains the same present value of future money,

• Decreases the future value of future money.

How much will $10,000 placed in a bank account paying 5% per year be worth compounded annually?

• $11,000

• $11,500

• $10,500

• $10,000

Find the value of $10,000 earning 5% interest per year after two years.

• $10,025

• $11,025

• $11,005

• $10,500

Find the value of $10,000 in 10 years. The investment earns 5% per year.

• $16,289

• $16,298

• $15,289

• $17,289

How much do I need to invest at 8% per year, in order to have $10,000 in One year

• $4,632.26

• $8,573.26

• $9,529.26

• $9,259.26

How much do I need to invest at 8% per year, in order to have $10,000 in Two years

• $8,573

• $9,259.26

• $4,632

• $16,289

How much do I need to invest at 8% per year, in order to have $10,000 in Ten years

• $9,259.26

• $8,573

• $4,632

• $16,289

Happy Harry has just bought a scratch lottery ticket and won €10,000. He wants to finance the future study of his newly born daughter and invests this money in a fund with a maturity of 18 years offering a promising yearly return of 6%. What is the amount available on the 18th birthday of his daughter?

• €28,560.39

• €28,540.39

• €28,543.39

• €28,534.39

Rudy will retire in 20 years. This year he wants to fund an amount of €15,000 to become available in 20 years. How much does he have to deposit into a pension plan earning 7% annually?

• €3,876.29

• €3,867.29

• €3,786.29

• €3,870.92

The future or present value of an amount depends upon:

• the interest rate.

• the number of periods.

• number of times per year compounding occurs.

• all of the above