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3.2   LO2: Find the Future Value of a Sum 1) \$1,200
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Question : 3.2   LO2: Find the Future Value of a Sum 1) \$1,200 : 1907278

3.2   LO2: Find the Future Value of a Sum

1) \$1,200 is deposited today into an account paying 6% interest compounded semiannually. How much interest will have been earned after 25 years?

A) \$3,950.24

B) \$1,312.53

C) \$20,904.19

D) \$5,260.69

E) \$4,060.69

2) The price of a Wendy's Bacon Cheeseburger is \$.99, the same as it was five years ago. Had the price of this sandwich increased at the same 3% annual rate as U.S. consumer prices did over the last five years, what would its price be today?

A) \$1.15

B) \$1.02

C) \$1.12

D) \$1.22

E) \$ .84

3) At an effective annual interest rate of 20%, how many years will it take a given amount to triple in value? (Round to the closest year.)

A) 5

B) 8

C) 6

D) 10

E) 9

4) If you presently have \$6,000 invested at a rate of 15%, how many years will it take for you investment to triple? (Round up to obtain a whole number of years if necessary.)

A) 2

B) 4

C) 6

D) 8

E) 10

5) A bank pays a quoted annual (nominal) interest rate of 8%. However, it pays interest (compounded) daily using a 365-day year. What is the effective annual rate of return?

A) 7.86%

B) 7.54%

C) 8.57%

D) 8.33%

E) 9.21%

6) You plan to invest \$2,500 in a money market account which will pay an annual stated (nominal) interest rate of 8.75%, but which compounds interest on a weekly basis. If you leave this money on deposit for one year (52 weeks), what will be your ending balance when you close the account?

A) \$2,583.28

B) \$2,611.72

C) \$2,681.00

D) \$2,703.46

E) \$2,728.40

7) You have just borrowed \$20,000 to buy a new car. The loan agreement calls for 60 monthly payments of \$444.89 each to begin one month from today. If the interest is compounded monthly, then what is the effective annual rate on this loan?

A) 12.68%

B) 14.12%

C) 12.00%

D) 13.25%

E) 15.08%

8) Bank A offers a 2-year certificate of deposit (CD) that pays 10 percent compounded annually. Bank B offers a 2-year CD that is compounded semi-annually. The CDs have identical risk. What is the stated, or nominal, rate that Bank B would have to offer to make you indifferent between the two investments?

A) 9.67%

B) 9.76%

C) 9.83%

D) 9.87%

E) 9.93%

9) The future value of \$200 received today and deposited at 8 percent compounded semi-annually for three years is:

A) \$380

B) \$158

C) \$253

D) \$252

E) \$248

10) \$1,200 is received at the beginning of year 1, \$2,200 is received at the beginning of year 2, and \$3,300 is received at the beginning of year 3. If these cash flows are deposited at 12 percent, their combined future value at the end of year 3 is:

A) \$6,700

B) \$17,000

C) \$12,510

D) \$7,504

E) \$8,141

Solution 5 (1 Ratings )

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