Clas Practice - Interest and Equivalence

At an interest rate of 8% per year, $10,000 today is equivalent to how much one year from now?

• 10500

• 10800

• 11000

• 11100

At an interest rate of 8% per year, $10,000 today is equivalent to how much one year ago?

• 10500

• 9555

• 9259

• 10000

At what interest rate would $100,000 now be equivalent to $80,000 one year ago?

• 15%

• 18%

• 20%

• 25%

Badger Pump Company invested $500,000 five years ago in a new product line that is now worth $1,000,000. What rate of return did the company earn on a simple interest basis?

• 20%

• 25%

• 27%

• 5%

Badger Pump Company invested $500,000 five years ago in a new product line that is now worth $1,000,000. What rate of return did the company earn on a compound interest basis?

• 10.87%

• 12.87%

• 14.87%

• 19.87%

Companies frequently borrow money under an arrangement that requires them to make periodic payments of only interest and then pay the principal of the loan all at once. A company that manufactures odor control chemicals borrowed $400,000 for 3 years at10% per year compound interest under such an arrangement. What is the difference in the total amount paid between this arrangement (identified as plan 1) and plan 2, in which the company makes no interest payments until the loan is due and then pays it off in one lump sum?

• $10,400

• $12,400

• $14,400

• $14,900

How long does it to take double an investment of $10,000 if the investment pays only simple interest at the rate of 12% per year?

• 6.33 years

• 7.33 years

• 3.33 years

• 8.33 years