The Time Value of Money PRETEST

When she was 20, Liz started saving $6,000 a year for retirement. Her goal is to reach $100,000 in savings by the time she’s 30. Her account earns 8% interest per year, compounded annually.

• Liz won't have saved $100,000 by age 30.

• Liz will have saved $100,000 by age 30.

• I don't have a clue!

• I am Jake the PEG!

When she was 20, Liz started saving $6,000 a year for retirement. Her goal is to reach $100,000 in savings by the time she’s 30. Her account earns 8% interest per year, compounded annually.

• She’ll fall short of

  her goal by about $10,081.

• She’ll fall short of

  her goal by about

  $13,081.

• She will go to jail!

• She will not pass!

Sarah plans to buy a car in five years, so she invests $10,000. She receives an annual interest rate of 5%, compounded semiannually.

What’s the future value of the $10,000 investment in five years?

• The $10,000 investment is worth $12,801

• The $10,000 investment is worth $11,801

• The $10,000 investment is worth $12,803

• No Clue Really!

Cassidy has saved $8,000 this year in an account that earns 9% interest annually.

Based on the rule of 72, it will take about (a)   years for her savings to double.

James wants to be able to make a $30,000 down payment on a new home in three years. If he can invest his savings in an account that earns 6% interest per year, compounded monthly, about how much will James need to deposit today to achieve his goal?

• $25,002

• $25,069

• $25,189

• $35,730

Ben sold his small online business for $100,000. The purchaser will pay him $20,000 today, then $20,000 every year for the next four years. Assume that Ben could invest a lump-sum payment today in an account yielding an interest rate of 4% annually. Find the total present value of all five payments.

• $87,096

• $88,384

• $92,598

• $93,964

Naomi’s parents want to have $50,000 saved for her college education. If they invest $20,000 today and earn 7% interest compounded annually, about how long will it take them to save the $50,000?

• 13.5 years

• 13.9 years

• 14.1 years

• 15.3 years

Tags

CCSS.HSF.LE.A.4

Which situation involves an annuity?

• investing a $1,000 lump sum into an investment account

• depositing $5,000 into a one-year CD

• using $500 to open a savings account

• making regular deposits of $100 into a sinking fund

Tags

CCSS.HSF.BF.A.2

Brittany will be working full time this summer to save for her goal of having $10,000 by the time she’s 21. Brittany has an account that will pay 3.5% interest, compounded monthly. She’ll turn 17 at the end of the summer. About how much will Brittany have to deposit at the end of the summer so that her money can grow into $10,000 by the time she’s 21?

• $8,663

• $8,681

• $8,695

• $8,720

When she was 20, Liz started saving $6,000 a year for retirement. Her goal is to reach $100,000 in savings by the time she’s 30. Her account earns 8% interest per year, compounded annually.

• She’ll fall short of her goal

• She’ll exceed her goal

• She will marry Jake the Peg

• She is a potlicker!