# Time Value of Money and Correct Answer

Topics: Time value of money, Investment, Future value Pages: 6 (958 words) Published: April 14, 2013
How much must you invest at 10% interest in order to see your investment grow to \$5,000 in 5 years? Select one:
A. \$3,070
B. \$3,415
C. \$3,105
D. none of these
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Question 2
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Sydney saved \$50,000 during her first year of work after college and plans to invest it for her retirement in 40 years. How much will she have available for retirement if she can make 8% on her investment? Select one:

A. \$596,250
B. \$12,953,000
C. \$2,345,100
D. \$1,086,226
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Question 3
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The future value of a \$1000 investment today at 8 percent annual interest compounded semiannually for 5 years is Select one:
A. \$1,469
B. \$1,480
C. \$1,520
D. \$1,555
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Question 4
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Mr. Blochirt is creating a college investment fund for his daughter. He will put in \$850 per year for the next 15 years and expects to earn an 8% annual rate of return. How much money will his daughter have when she starts college? Select one:

A. \$11,250
B. \$12,263
C. \$24,003
D. \$23,079
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Question 5
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If Gerry makes a deposit of \$1,500 at the end of each quarter for 5 years, how much will he have at the end of the 5 years assuming a 12% annual return and quarterly compounding? Select one:
A. \$40,305
B. \$30,000
C. \$108,078
D. \$161,220
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Question 6
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At an effective annual interest rate of 20 percent, how many years will it take a given amount to triple in value? Select one:
A. 5 years
B. 6 years
C. 8 years
D. 10 years
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The correct answer is: 6 years
Question 7
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At an effective annual interest rate of 15 percent, how many years will it take a given amount to double in value? (Round to the closest year.) Select one:
A. 5 years
B. 6 years
C. 8 years
D. 10 years
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The correct answer is: 5 years
Question 8
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Mr. Darden is selling his house for \$165,000. He bought it for \$55,000 nine years ago. What is the annual return on his investment? Select one:
A. 3%
B. Between 14% and 16%
C. 13%
D. None of these
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Question 9
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After 20 years, 100 shares of stock originally purchased for \$1000 was sold for \$5,000. What was the yield on the investment? Choose the closest answer. Select one:
A. 19%
B. 5%
C. 12%
D. 8%
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Question 10
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As the time period until receipt increases, the present value of an amount at a fixed interest rate Select one:
A. decreases.
B. remains the same.
C. increases.
D. Not enough information to tell.
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Question 11
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You have a choice of two equally risky annuities, each paying \$1,000 per year for 10 years. One is an annuity due, while the other is an ordinary annuity Which would you choose?
Select one:
A. The ordinary annuity
B. The annuity due
C. No preference, they are of equal value
D. Information is provided is insufficient to make a choice. Feedback
The correct answer is: The annuity due
Question 12
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As the discount rate becomes higher and higher, the present value of inflows approaches Select one:
A. 0
B. minus infinity
C. plus infinity
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