# Florida International University: Intermediate Finance

**Topics:**Compound interest, Time value of money, Deposit account

**Pages:**6 (1172 words)

**Published:**November 20, 2012

Sample TEST I

Name:_______________________________________

Panther ID:_______________________________________

FIU E-mail:_______________________________________

Instructions:

1.Your examination has two parts, PART I and PART II.

2.At anytime during the test, you can’t have anything other than your test, pencil, eraser, calculator and formula sheet on your desk. 3.ABSOLUTELY NO QUESTIONS/TALKING DURING EXAMINATION

4.Don’t forget to hand in your Formula Sheet.

5.Read, write your name and sign below.

-------------------------------------------------------------------------------------------------------, I solemnly declare that I will not cheat or help others in cheat in the examination

SIGNATURE

PART I

There are 15 questions in the first part, answer all of them. 1. The sum of an infinite geometric series ar, ar2, ar3, ar4, ……up to ∞ is

a. a(1 – rn) for r ≥ 1

1 – r

b. a(1 – rn+1) for r ≥ 1

1 - r

c. a for r < 1

1– r

d. ar for r < 1

1 - r

e. None of the above

2. Consider the following series

S = 10 + 10 + ………... 10 (1.06) (1.06)2 (1.06)100

The sum of this series is

a.10 { 1 – ( 1/ 1.06)100 }

1.06

b.10 { 1 – ( 1/ 1.06)100 } (1.06)100

0.6 (10)100

c.10 { 1 – ( 1/ 1.06)100 }

0.06

d.10 { 1 – ( 1/ 1.06)101 }

0.06

e.10 { 1 – ( 1/ 1.06)101 } (1.06) 0.06

3. What is the future value of $10.30 (deposited a year from now) at the end of 20 years, assuming the simple rate of interest is 0.5 percent? (Answer correct within 2 cents)

a.$ 11.28

b.$ 11.33

c.$ 21.12

d.$1,091.80

e.None of the above

4. In how many years an amount will double if the simple rate of interest is 1 percent? (Answer correct within 2)

a.10 years

b.Never

c.1000 years

d.100 years

e.139 years

5. What is the future value of $ 50 in 20 years if the rates of interest are 12 percent for the first six years, 11 percent for next 5 years and 10 percent for the remaining period? (Answer correct within one dollar)

a.$ 336.37

b.$ 406.23

c.$ 392.13

d.$ 413.91

e.None of the above 6. You will receive $160 in the beginning of year 89. What is its present value at the beginning of 87 if the rate of interest is 13 percent? (Answer correct within 50 cents)

a.$ 141.59

b.$ 110.89

c.$ 125.30

d.$ 153.91

e.None of the above 7. In how many years $ 100.69 will become $ 382.42 if the rate of interest is 6.9 percent (Answer correct within 0.5)

a.21 years

b.20 years

c.14.6 years

d.15.6 years

e.None of the above 8. Suppose you deposit $385.54 at the beginning of each year for 10 years. Find the future value of these deposits at the end of year 11 if the rate of interest is 10 percent compounded annually (Correct within five dollars)

a.$6145

b.$6010

c.$6759...

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