Multiple Choice Questions
21.Interest may be defined as:
A. Time.
B. A borrower’s payment to the owner of an asset for its use.
C. The future value of a present amount.
D. Always a liability.
E. Always an asset.
22. If we want to know the value of present-day assets at a future date, we can use:
23.Which interest rate column would you use from a present value or future value table for 8% interest compounded quarterly?
A. 12%
B. 6%
C. 3%
D. 2%
E. 1%
24.A company is considering investing in a project that is expected to return $350,000 four years from now. How much is the company willing to pay for this investment if the company requires a 12% return?
A. $ 55,606
B. $137,681
C. $222,425
D. $265,764
E. $350,000
25.Jasonhas a loan that requires a single payment of $4,000 at the end of 3 years. The loan’s interest rate is 6%, compounded semiannually. How much did Jasonborrow?
A. $3,358.40
B. $4,000.00
C. $3,660.40
D. $4,776.40
E. $3,350.00
26. Patriciawants to invest a sum of money today that will yield$10,000 at the end of 6 years. Assuming she can earn an interest rate of 6% compounded annually, how much must she invest today?
A. $7,050
B. $9,400
C. $6,000
D. $8,836
E. $8,306
27. Marshall has received an inheritance andwants to invest a sum of money today that will yield $5,000 at the end of each of the next 10 years. Assuming he can earn an interest rate of 5% compounded annually, how much of his inheritance must he invest today?
A. $50,000.00
B. $47,500.00
C. $45,125.00
D. $38,608.50
E. $100,000.00
28. Cody invests $1,800 per year from his summer wages at a 4% annual interest rate. He plans to take a European vacation at the end of 4 years when he graduates from college. How much will he have available to spend on his vacation?
A. $7,787.52
B. $7,488.00
C. $6,912.00
D. $7,200.00
E. $7,643.70
29. Jessica received a gift of $7,500 at the time of her high school graduation. She invests it in an account that yields 10% compounded semi-annually. What will the value of Jessica’s investment be at the end of 5 years?
A. $8,250.00
B. $11,250.00
C. $12,216.75
D. $9,375.00
E. $10,500.00
30.A company expects to invest $5,000 today at 12% annual interest and plans to receive $15,529 at the end of the investment period. How many years will elapse before the company accumulates the $15,529?
A. 0.322 years
B. 3.1058 years
C. 5 years
D. 8 years
E. 10 years