Test Bank Chapter 12 Compound Interest and Present Value - Business Math Procedures 13e Test Bank with Answers by Jeffrey Slater. DOCX document preview.
Practical Business Math Procedures, 13e (Slater)
Chapter 12 Compound Interest and Present Value
1) Compounding always reduces the principal.
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (1) Compare simple interest with compound interest.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
2) Compounding looks into the present when we know what we have in the future.
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (1) Compare simple interest with compound interest.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
3) Annual means compounded once a year.
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (1) Compare simple interest with compound interest.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
4) Interest = principal × rate divided by the time.
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (1) Compare simple interest with compound interest.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
5) Compounding always requires the use of tables.
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (1) Compare simple interest with compound interest.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
6) Interest calculated on a balance every three months is said to be compounded quarterly.
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (1) Compare simple interest with compound interest.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
7) The rate used in compounding is found by taking the annual rate divided by the number of times compounded per day.
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
8) The number of periods in compounding is found by multiplying the number of years times the number of times compounded per year.
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
9) Compounding results in earning higher interest than simple interest.
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (1) Compare simple interest with compound interest.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
10) The table for the compound value of $1 has only table factors over $1.00.
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
11) A compound table factor of 1.2950 means that $1 at a certain rate of interest for a certain period of time will increase in value to approximately $1.30.
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
12) Compound value = $ amount divided by table factor.
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
13) The number of periods for a table lookup on $5,000 at 12% compounded semiannually for 10 years is 10 periods.
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
14) The rate for a table lookup on a $4,000, 12% investment compounded quarterly for four years is 4%.
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
15) Using the table in the handbook, the table factor for compounding $4,000 at 9% compounded annually for one year is 1.0900.
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
16) The interest on $3,000 at 8% compounded semiannually for six years by using the table lookup (use table in handbook) is $1,803.
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
17) The annual rate a bank advertises is the same as the effective rate.
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (3) Explain and compute the effective rate (APY).
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
18) The nominal rate is really the true rate.
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (3) Explain and compute the effective rate (APY).
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
19) The effective rate (APY) can be calculated by the interest for one year divided by the principal.
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (3) Explain and compute the effective rate (APY).
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
20) Effective rates can be seen in the compounding table for one dollar.
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (3) Explain and compute the effective rate (APY).
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
21) Compounding interest daily is seldom used in comparison to compounding once a year.
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (3) Explain and compute the effective rate (APY).
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
22) Using the interest for daily compounding (in your handbook), $700 would grow to $790 at the end of three years at 8% interest.
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (3) Explain and compute the effective rate (APY).
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
23) Present value starts with the future and tries to calculate its worth in the present.
Difficulty: 1 Easy
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (1) Compare compound interest (FV) with present value (PV).
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
24) In the table of present value of one dollar, all table factors are less than $1.
Difficulty: 1 Easy
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
25) A table factor of 0.7513 from a present value table means that if $.75 is invested at a certain rate of interest for a certain number of periods, it would be worth $1 in the past.
Difficulty: 2 Medium
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
26) The compound table can be used to prove a present value calculation.
Difficulty: 1 Easy
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (3) Check the present value answer by compounding.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
27) $14,182 is the present value of $21,000 that earns at a bank 12% compounded quarterly for four years. (Use table in handbook.)
Difficulty: 2 Medium
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
28) Compounding:
A) Calculates interest periodically
B) Looks into the present when the future is known
C) Is done only on an annual basis
D) Results in less interest than simple interest
E) None of these
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (1) Compare simple interest with compound interest.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
29) In tables for calculating compound interest, the number of periods is equal to:
A) Number of years divided by rate
B) Number of years × rate
C) Number of years × number of times compounded per year
D) Number of years divided by number of times compounded per year
E) None of these
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
30) The rate used in the table for calculating compound interest is found by:
A) Annual rate × number of periods
B) Annual rate × number of times compounded per year
C) Annual rate divided by number of times compounded per year
D) Annual rate divided semiannually
E) None of these
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
31) Using the table in handbook, the value of $60 deposited in a bank for six years at a rate of 10% compounded annually is:
A) $96.63
B) $96.36
C) $106.30
D) $106.03
E) None of these
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
32) The interest on $6,000 at 6% compounded semiannually for eight years is (use table in the handbook):
A) $3,628.20
B) $3,682.02
C) $362.82
D) $13,628.20
E) None of these
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
33) The effective rate (APY) is:
A) The nominal rate
B) The stated rate
C) The true semiannual rate
D) The true annual rate
E) None of these
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (3) Explain and compute the effective rate (APY).
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
34) Effective rate (APY) is:
A) Never related to compound table
B) Interest for one year divided by annual rate
C) Interest for one year divided by principal for two years
D) Interest for one year divided by principal
E) None of these
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (3) Explain and compute the effective rate (APY).
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
35) Using the table in your handbook, $6,000 for six years at 8½% compounded daily will grow to:
A) $8,991.02
B) $8,950.10
C) $9,991.20
D) $9,990.02
E) None of these
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (3) Explain and compute the effective rate (APY).
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
36) Present value does not:
A) Know future amount
B) Know the present dollar amount
C) Find present dollar amount
D) Use tables
E) None of these
Difficulty: 1 Easy
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (1) Compare compound interest (FV) with present value (PV).
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
37) A table factor of 0.7312 from the present value table in this chapter means that a certain rate of interest for a certain period of time will equal:
A) $1
B) Over $1
C) Less than $1
D) Never equal
E) None of these
Difficulty: 1 Easy
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (1) Compare compound interest (FV) with present value (PV).
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
38) Using the table in the handbook, the present value of $12,000 for six years compounded at 6% semiannually is:
A) $12,814.08
B) $8,461.08
C) $8,416.80
D) $8,614.80
E) None of these
Difficulty: 2 Medium
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
39) $20,000 for 14 years compounded at 8% semiannually results in how many periods?
A) 64
B) 28
C) 12
D) 14
E) None of these
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
40) $100,000 for 20 years compounded at 4% annually results in a rate per period of:
A) 3%
B) 5%
C) 4%
D) 1%
E) None of these
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
41) Sam Monte deposits $21,500 into Legal Bank, which pays 6% interest that is compounded semiannually. Using the table in the handbook, what will Sam have in his account at the end of six years?
A) $29,760.30
B) $30,654.70
C) $30,456.07
D) $29,670.03
E) None of these
Difficulty: 3 Hard
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
42) Anne Katz, the owner of Katz Sport Shop, lends $8,000 to Shelley Slater to help her open an art shop. Shelley plans to repay Anne at the end of eight years with interest compounded semiannually at 8%. At the end of eight years, Anne will receive (use the tables in the handbook):
A) $14,984
B) $16,857
C) $16,587
D) $14,484
E) None of these
Difficulty: 3 Hard
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
43) Merle Fonda opened a new savings account. She deposited $40,000 at 10% compounded semiannually. At the start of the fourth year, Merle deposits an additional $20,000 that is also compounded semiannually at 10%. At the end of six years, the balance in Merle's account is (use the tables in the handbook):
A) $73,604.00
B) $53,604.00
C) $80,406.00
D) $98,636.72
E) None of these
Difficulty: 3 Hard
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
44) Mia Kaminsky wants to attend Riverside Community College. She will need to have $25,000 six years from today. Mia is wondering what she will have to put in the bank today so that she will have $25,000 six years from now. Her bank pays 6% compounded semiannually. Using the tables in the handbook, the amount Mia will have to deposit is:
A) $18,950
B) $17,625
C) $17,535
D) $33,622
E) None of these
Difficulty: 3 Hard
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
45) Gracie Shay wants to buy a new Hummer in six years. Gracie estimates the cost of the Hummer will be $35,000. If she invests $22,000 now at a rate of 6% compounded quarterly, she:
A) Will have enough money
B) Will have exactly $32,000
C) Will have $33,450
D) Will have $31,449
E) None of these
Difficulty: 3 Hard
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
46) Jane is having difficulty deciding whether to put her savings in the Mystic Bank or in the Four Rivers Bank. Mystic offers a 12% rate compounded quarterly, and Four Rivers offers 14% compounded semiannually. Jane has $40,000 to invest and expects to withdraw the money at the end of five years. (Use the tables in the handbook.) The best deal is:
A) Four Rivers
B) Four Rivers for first two years
C) Mystic
D) Mystic for last two years
E) None of these
Difficulty: 3 Hard
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Analyze
Type: Static
Accessibility: Keyboard Navigation
47) Earl Miller deposited $25,000 at Y Bank at an interest rate of 12% compounded quarterly. (Use the tables in the handbook.) The effective rate (APY) is: (round to the nearest hundredth percent, if applicable)
A) 12%
B) 12.55%
C) 12.15%
D) 13.2%
E) None of these
Difficulty: 3 Hard
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (3) Explain and compute the effective rate (APY).
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
48) Al Miler, the owner of Al's Garage, estimates that he will need $29,000 for new equipment in 15 years. Al decides that he will put aside the money now so that in 15 years the $29,000 will be available. His bank offers him 10% interest compounded semiannually. (Use the tables in the handbook.) Al must invest today:
A) $6,710.60
B) $6,942.60
C) $6,701.60
D) $125,335.10
E) None of these
Difficulty: 3 Hard
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
49) Burton Bush wants to retire in Arizona when he is 80 years of age. Burton, who is now 55, believes he will need $500,000 to retire comfortably. To date, he has set aside no retirement money. If he gets an interest rate of 6% compounded annually, he will have to invest today (use the tables in the handbook):
A) $92,300
B) $90,500
C) $100,500
D) $116,500
E) None of these
Difficulty: 3 Hard
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
50) Jim Moore opens a new savings account. He deposits $12,000 at 12% compounded semiannually. At the start of the fourth year, Jim deposits an additional $50,000 that is also compounded semiannually at 12%. At the end of six years, the balance in Jim Moore's account is (use the tables in the handbook):
A) $66,081.20
B) $50,000.00
C) $16,081.20
D) $88,555.42
E) None of these
Difficulty: 3 Hard
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Analyze
Type: Static
Accessibility: Keyboard Navigation
51) Interest on $2,630 at 3% compounded semiannually for five years is:
A) $304.90
B) $414.49
C) $511.96
D) $422.12
E) None of these
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
52) Ellen deposits $6,773 into an account earning 1% annually. After seven years what will Ellen's balance have grown to, including interest?
A) $7,516.68
B) $7,516.88
C) $7,261.33
D) $6,836.78
E) None of these
Difficulty: 3 Hard
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
53) Lisa Richter deposited $5,000 at 4% compounded semiannually for three years. At the beginning of the fourth year, Lisa deposited $2,500. What would her balance be at the end of five years assuming she is still earning 4% compounded semiannually?
A) $5,131
B) $8,131
C) $8,800
D) $8,800.99
E) None of these
Difficulty: 3 Hard
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Analyze
Type: Static
Accessibility: Keyboard Navigation
54) Trisha Long wants to buy a boat in five years. She estimates the boat will cost $15,000 at that time. What must Trisha deposit today in an account earning 5% annually to have enough to buy the boat in five years?
A) $12,328.50
B) $11,527.50
C) $11,752.50
D) $11,077.50
E) None of these
Difficulty: 3 Hard
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
55) Katie Hector wants to purchase a condo in Oxford, MS, in 20 years. The cost of the condo is expected to be $180,000. Assuming she can earn 6% annually, what should Katie deposit today?
A) $126,900
B) $56,124
C) $89,400
D) $180,000
E) None of these
Difficulty: 3 Hard
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
Match the following terms with their definitions.
A) Year times number of times compounded in one year
B) Twice a year
C) Stated rate
D) True rate of interest
E) Amount calculated on adjusted principal
F) Periodically interest is calculated and added to principal
G) Rate divided by number of times compounded per year
H) Know future amount looking for present
I) Four times per year
J) Twelve times per year
56) Quarterly
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture; LU 12-02 Present Value-The Big Picture
Learning Objective: 12-01 (1) Compare simple interest with compound interest.; 12-01 (2) Calculate the compound amount and interest manually and by table lookup.; 12-01 (3) Explain and compute the effective rate (APY).; 12-02 (1) Compare compound interest (FV) with present value (PV).; 12-02 (2) Compute present value by table lookup.; 12-02 (3) Check the present value answer by compounding.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
57) Nominal rate
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture; LU 12-02 Present Value-The Big Picture
Learning Objective: 12-01 (1) Compare simple interest with compound interest.; 12-01 (2) Calculate the compound amount and interest manually and by table lookup.; 12-01 (3) Explain and compute the effective rate (APY).; 12-02 (1) Compare compound interest (FV) with present value (PV).; 12-02 (2) Compute present value by table lookup.; 12-02 (3) Check the present value answer by compounding.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
58) Rate
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture; LU 12-02 Present Value-The Big Picture
Learning Objective: 12-01 (1) Compare simple interest with compound interest.; 12-01 (2) Calculate the compound amount and interest manually and by table lookup.; 12-01 (3) Explain and compute the effective rate (APY).; 12-02 (1) Compare compound interest (FV) with present value (PV).; 12-02 (2) Compute present value by table lookup.; 12-02 (3) Check the present value answer by compounding.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
59) Semiannually
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture; LU 12-02 Present Value-The Big Picture
Learning Objective: 12-01 (1) Compare simple interest with compound interest.; 12-01 (2) Calculate the compound amount and interest manually and by table lookup.; 12-01 (3) Explain and compute the effective rate (APY).; 12-02 (1) Compare compound interest (FV) with present value (PV).; 12-02 (2) Compute present value by table lookup.; 12-02 (3) Check the present value answer by compounding.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
60) Compound
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture; LU 12-02 Present Value-The Big Picture
Learning Objective: 12-01 (1) Compare simple interest with compound interest.; 12-01 (2) Calculate the compound amount and interest manually and by table lookup.; 12-01 (3) Explain and compute the effective rate (APY).; 12-02 (1) Compare compound interest (FV) with present value (PV).; 12-02 (2) Compute present value by table lookup.; 12-02 (3) Check the present value answer by compounding.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
61) Monthly
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture; LU 12-02 Present Value-The Big Picture
Learning Objective: 12-01 (1) Compare simple interest with compound interest.; 12-01 (2) Calculate the compound amount and interest manually and by table lookup.; 12-01 (3) Explain and compute the effective rate (APY).; 12-02 (1) Compare compound interest (FV) with present value (PV).; 12-02 (2) Compute present value by table lookup.; 12-02 (3) Check the present value answer by compounding.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
62) Interest
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture; LU 12-02 Present Value-The Big Picture
Learning Objective: 12-01 (1) Compare simple interest with compound interest.; 12-01 (2) Calculate the compound amount and interest manually and by table lookup.; 12-01 (3) Explain and compute the effective rate (APY).; 12-02 (1) Compare compound interest (FV) with present value (PV).; 12-02 (2) Compute present value by table lookup.; 12-02 (3) Check the present value answer by compounding.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
63) Periods
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture; LU 12-02 Present Value-The Big Picture
Learning Objective: 12-01 (1) Compare simple interest with compound interest.; 12-01 (2) Calculate the compound amount and interest manually and by table lookup.; 12-01 (3) Explain and compute the effective rate (APY).; 12-02 (1) Compare compound interest (FV) with present value (PV).; 12-02 (2) Compute present value by table lookup.; 12-02 (3) Check the present value answer by compounding.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
64) Effective rate (APY)
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture; LU 12-02 Present Value-The Big Picture
Learning Objective: 12-01 (1) Compare simple interest with compound interest.; 12-01 (2) Calculate the compound amount and interest manually and by table lookup.; 12-01 (3) Explain and compute the effective rate (APY).; 12-02 (1) Compare compound interest (FV) with present value (PV).; 12-02 (2) Compute present value by table lookup.; 12-02 (3) Check the present value answer by compounding.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
65) Present value
Difficulty: 1 Easy
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture; LU 12-02 Present Value-The Big Picture
Learning Objective: 12-01 (1) Compare simple interest with compound interest.; 12-01 (2) Calculate the compound amount and interest manually and by table lookup.; 12-01 (3) Explain and compute the effective rate (APY).; 12-02 (1) Compare compound interest (FV) with present value (PV).; 12-02 (2) Compute present value by table lookup.; 12-02 (3) Check the present value answer by compounding.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
Answers: 56) I 57) C 58) G 59) B 60) F 61) J 62) E 63) A 64) D 65) H
66) Complete without using tables. (Show work.)
Principal | Time | Rate of Compound | When Compounded | # of Periods to be Compounded | Total Amount | Total Interest |
$300 | 1 year | 6% | Quarterly | A | B | C |
A. 1 × 4 = 4; B. $300 × 1.015 = $304.50 × 1.015 = $309.0675 × 1.015 = $313.7035125 × 1.015 = $318.41; C. $318.41 - $300 = $18.41.
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (1) Compare simple interest with compound interest.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
67) Solve by using compound table:
Principal | Time | Rate of Compound | When Compounded | # of Periods to be Compounded | Total Amount | Total Interest |
$300 | 1 year | 6% | Quarterly | A | B | C |
A. 1 × 4 = 4; B. $300 × 1.0614 = $318.42; C. $318.42 - $300.00 = $18.42.
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
68) Solve by using compound table:
Principal | Rate | Time | When Compounded | Total Amount |
$8,000 | 10% | 3 years | Semiannually | ? |
$8,000 × 1.3401 = $10,720.80.
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
69) Solve by using compound table:
Principal | Rate | Time | When Compounded | Total Amount |
$15,000 | 12% | 4 years | Quarterly | ? |
$15,000 × 1.6047 = $24,070.50.
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
70) Find effective rate (APY) and show work: (round answer to the nearest hundredth)
Principal | Rate | When Compounded | Effective Rate (APY) |
$5,000 | 10% | Semiannually | ? |
$5,000 × 1.1025 = $5,512.50; $5,512.50 - $5,000 = $512.50; $512.50/$5,000.00 = 10.25%.
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (3) Explain and compute the effective rate (APY).
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
71) Use the present value table to complete:
Future Amount Desired | Length of Time | Rate Compounded | Table Period | Rate Used | P.V. Factor | P.V. Amount |
$9,000 | 20 yrs | 10% semiannually | A | B | C | D |
A. 20 × 2 = 40 periods; B. 10% / 2 = 5%; C. 1420; D. 1420 × $9,000 = $1,278.
Difficulty: 2 Medium
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
72) Use the present value table to complete:
Future Amount Desired | Length of Time | Rate Compounded | Table Period | Rate Used | P.V. Factor | P.V. Amount |
$11,000 | 6 yrs | 12% quarterly | A | B | C | D |
A. 6 × 4 = 24; B. 12% / 4 = 3%; C. 4919; D. $5,410.90 ($11,000 × .4919).
Difficulty: 2 Medium
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
73) Juanita Finn deposits $12,000 into Valley Bank, which pays interest of 8% compounded annually for four years. How much will Juanita have in her account?
$12,000 × 1.3605 = $16,326
Difficulty: 3 Hard
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (1) Compare simple interest with compound interest.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
74) John Riviera deposits $14,000 in National Bank at 8% compounded quarterly. What is the effective rate (APY) of interest? (round answer to nearest hundredth)
$14,000 × 1.0824 = $15,153.60; $15,153.60 - $14,000 = $1,153.60/$14,000 = 8.24%.
Difficulty: 3 Hard
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (3) Explain and compute the effective rate (APY).
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
75) Jim Smith believes that in 30 years he will need $80,000 to buy a retirement cottage. Assuming he gets an interest rate of 9% compounded annually, how much will he have to invest today to reach his retirement goal?
$80,000 × .0754 = $6,032.
Difficulty: 3 Hard
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
76) Jarad Rodriguez deposits $10,000 at 10% compounded semiannually. At the start of year 6, Jarad deposits an additional $5,000 that is compounded at the same rate. At the end of 10 years, what is the balance in Jarad's account?
10 periods 5%; $10,000 × 1.6289 = $16,289 + $5,000 = $21,289; $21,289 × 1.6289 = $34,677.65.
Difficulty: 3 Hard
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Analyze
Type: Static
Accessibility: Keyboard Navigation
77) Kathy Crag, the owner of The Fabric Corner, lent $15,000 to Dani Flynn to open her own card shop. Dani plans to repay Kathy at the end of 7 years with 8% interest compounded quarterly. How much will Kathy receive at the end of 12 years?
8% / 4 = 2%; 7 × 4 = 28; $15,000 × 1.7410 = $26,115
Difficulty: 3 Hard
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
78) Molly Scupper wants to attend Clarke University. She will need $90,000 eight years from today. Assume Molly's bank pays 6% interest compounded semiannually. What must Molly deposit today to have $90,000 in eight years? Verify your answer.
$90,000 × .6232 = $56,088; Verify by $56,088 × 1.6047 = $90,004.41. Answer is slightly different than 90,000 due to rounding of the table factors
Difficulty: 3 Hard
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
79) Moxie Fox deposited $30,000 in a savings account at 6% interest compounded semiannually. At the beginning of year 4, Moxie deposits an additional $60,000 at 6% interest compounded semiannually. At the end of six years, what is the balance in Moxie's account?
3% 6 periods $30,000 × 1.1941 = $35,823.00 + $60,000 = $95,823
$95,000 × 1.1941 = $114,422.24.
Difficulty: 3 Hard
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Analyze
Type: Static
Accessibility: Keyboard Navigation
80) Pete Sist wants to buy a new Chevrolet in five years. He estimates the car will cost $24,000. Assuming Pete invests $15,000 now at 10% interest compounded semiannually, will he have enough money to buy the car at the end of five years?
10%/2 = 5%; 5 × 2 = 10 periods; $15,000 × 1.6289 = $24,433.50; yes.
Difficulty: 3 Hard
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
81) Jim Ryan deposited $8,000 at National Bank at 6% interest compounded quarterly. What was the effective rate (APY)? (Round to the nearest hundredth percent.)
$8,000 × 1.0614 = $8,491.20; $8,491.20 - $8,000 = $491.20; $491.20/$8,000 = 6.14%.
Difficulty: 3 Hard
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (3) Explain and compute the effective rate (APY).
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
82) Janet Ring estimates she will need $35,000 for a new computerized office system. Janet decided to put aside the money today so that it will be available in 10 years. Pod Bank offers Janet 8% interest compounded semiannually. How much must Janet invest today to have $35,000 in 10 years?
8% / 2 = 4%; 10 × 2 = 20 periods; $35,000 × .4564 = $15,974.
Difficulty: 3 Hard
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
83) Complete without using table:
Principal | Time | Rate of Compound | When Compounded | # of Periods to be Compounded | Total Amount | Total Interest |
$300 | 1 year | 16% | Quarterly | A | B | C |
A. 1 × 4 = 4; B. $300 × 1.04 = $312, $312 × 1.04 = $324.48, $324.48 × 1.04 = $337.46; $337.46 × 1.04 = $350.96; C. $350.96 - $300 = $50.96
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (1) Compare simple interest with compound interest.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
84) Complete without using table:
Principal | Time | Rate of Compound | When Compounded | # of Periods to be Compounded | Total Amount | Total Interest |
$1,500 | 1 year | 12% | Quarterly | A | B | C |
A.1 × 4 = 4; B. $1,500 × 1.03 = $1,545 × 1.03 = $1,591.35 × 1.03 = $1,639.09 × 1.03 = $1,688.26; C. $1,688.26 - $1,500 = $188.26.
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (1) Compare simple interest with compound interest.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
85) Solve by using compound table:
Principal | Time | Rate of Compound | When Compounded | # of Periods to be Compounded | Total Amount | Total Interest |
$300 | 1 year | 16% | Quarterly | A | B | C |
A. 1 × 4 = 4; B. 16% / 4 = 4%, 1.1699 × $300 = $350.97; C. $350.97 - $300 = $50.97
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (1) Compare simple interest with compound interest.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
86) Solve by using compound table:
Principal | Time | Rate of Compound | When Compounded | # of Periods to be Compounded | Total Amount | Total Interest |
$1,500 | 1 year | 12% | Quarterly | A | B | C |
A. 1 × 4 = 4; B. 12% / 4 = 3%; 1.1255 × $1,500 = $1,688.25; C. $1,688.25 - $1,500 = $188.25.
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (1) Compare simple interest with compound interest.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
87) Solve by using compound table. Find future value.
Principal | Rate | Time | # times Compounded per year | Future Value |
$2,000 | 8% | 2 years | Quarterly | ? |
1.1717 × $2,000 = $2,343.40.
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
88) Solve by using compound table. Find future value.
Principal | Rate | Time | # times Compounded per year | Future Value |
$18,000 | 12% | 4 years | Semiannually | ? |
8 periods at 6%; 1.5938 × $18,000 = $28,688.40.
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
89) Solve by using compound table. Find future value.
Principal | Rate | Time | # times Compounded per year | Future Value |
$3,000 | 8% | 3 years | Quarterly | ? |
12 periods at 2% = 1.2682 × $3,000 = $3,804.60.
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
90) Solve by compound table. Find future value.
Principal | Rate | Time | # times Compounded per year | Future Value |
$12,000 | 10% | 2 years | Semiannually | ? |
Four periods at 5% = 1.2155 × $12,000 = $14,586.
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
91) Find effective rate (APY) and show work: (round to nearest hundredth)
Principal | Rate | # times Compounded per year | Effective Rate (APY) |
$8,000 | 12% | Semiannually | ? |
2 periods, 6% interest; 1.1236 × $8,000 = $8,988.80; $8,988.80 - $8,000 = $988.80; $988.80/$8,000 = 12.36%.
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (3) Explain and compute the effective rate (APY).
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
92) Find effective rate (APY) and show work: (round to nearest hundredth)
Principal | Rate | # times Compounded per year | Effective Rate (APY) |
$7,500 | 10% | Semiannually | ? |
2 periods 5% 1.1025 × $7,500 = $8,268.75 - $7,500 = $768.75; $768.75/$7,500 = 10.25%.
Difficulty: 2 Medium
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (3) Explain and compute the effective rate (APY).
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
93) Use the present value table to complete:
Future Amount Desired | Length of Time | Rate Compounded | Table Periods | Rate Used | P.V. Factor | P.V. Amount |
$8,000 | 10 yrs | 8% semiannual | A | B | C | D |
A. 10 × 2 = 20; B. 8% / 2 = 4%; C. 4564; D. 4564 × $8,000 = $3,651.20
Difficulty: 2 Medium
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
94) Use the present value table to complete:
Future Amount Desired | Length of Time | Rate Compounded | Table Periods | Rate Used | P.V. Factor | P.V. Amount |
$14,000 | 5 yrs | 6% quarterly | A | B | C | D |
A. 5 × 4 = 20; B. 6% / 4 = 1½%; C. 7425; D. 7425 × $14,000 = $10,395.
Difficulty: 2 Medium
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
95) Use the present value table to complete:
Future Amount Desired | Length of Time | Rate Compounded | Table Periods | Rate Used | P.V. Factor | P.V. Amount |
$12,000 | 12 yrs | 12% semiannually | A | B | C | D |
A. 12 × 2 = 24; B. 12% / 2 = 6%; C. 2470; D. 2470 × $12,000 = $2,964
Difficulty: 2 Medium
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
96) Use the present value table to complete:
Future Amount Desired | Length of Time | Rate Compounded | Table Periods | Rate Used | P.V. Factor | P.V. Amount |
$24,000 | 6 yrs | 8% quarterly | A | B | C | D |
A. 6 × 4 = 24; B. 8% / 4 = 2%; C. 6217; D. 6217 × $24,000 = $14,920.80; 24 periods at 2% = .6217 × $24,000 = $14,920.80.
Difficulty: 2 Medium
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
97) Don Williams wants to buy a boat five years from today. He will need $40,000. Don wants you to calculate how much he needs today to put in the bank (10% compounded semiannually) to reach his goal in the future.
10 periods at 5% = .6139 × $40,000 = $24,556.
Difficulty: 3 Hard
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
98) Paul Lospennato wants to buy a house five years from today for $90,000. Paul wants you to calculate how much he needs today to put in the bank (10% compounded semiannually) to reach his goal in the future.
10 periods at 5% = .6139 × $90,000 = $55,251.
Difficulty: 3 Hard
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
99) Joe Diamond deposited $9,000 into the Rong Bank, which pays 12% interest, compounded quarterly. Calculate the amount Joe will have in his account at the end of four years.
$9,000 × 1.6047 = $14,442.30.
Difficulty: 3 Hard
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
100) John James lent Mel Karras $8,000 to open a pottery shop. Mel will repay John at the end of five years with interest, compounded quarterly, at 8%. How much will John receive at the end of five years?
8% / 4 = 2%, 5 × 4 = 20; $8,000 × 1.4859 = $11,887.20.
Difficulty: 3 Hard
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
101) Al Safe deposited $15,000 at Q Bank at an interest rate of 16%, compounded quarterly. What was the effective rate (APY)? (round to nearest hundredth)
16% / 4 = 4%, 4 periods; 1.1699 × $15,000 = 17,548.50; $17,548.50 - $15,000.00 = $2,548.50; $2,548.50/$15,000.00 = 16.99%.
Difficulty: 3 Hard
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (3) Explain and compute the effective rate (APY).
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
102) Mark Larken promised his grandson Ralph that he would give him $3,000 six years from today for graduating from high school. If money is worth 10% compounded semiannually, what is the present value of this money?
10% / 2 = 5%, 6 × 2 = 12 periods, $3,000 × .5568 = $1,670.40.
Difficulty: 3 Hard
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
103) Marcia Gadzera wants to retire in San Diego when she is 65 years old. Marcia is now 50 and believes she will need $900,000 to retire comfortably. To date, she has set aside no retirement money. If she gets interest of 10% compounded semiannually, how much must she invest today to meet her goal of $900,000?
$900,000 × .2314 = $208,260.
Difficulty: 3 Hard
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
104) Mel Ross thinks he would like to buy a used car in five years for $8,000. He wants to put the money aside now so that in five years the $8,000 will be available. His bank offers him 12% interest, compounded semiannually. Could you calculate what Mel must invest today?
$8,000 × .5584 = $4,467.20.
Difficulty: 3 Hard
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
105) Jim Ring wants to attend Northeast College. He will need $20,000 four years from today. If Jim's bank pays 8% compounded quarterly, what must he deposit today so that he will have the $20,000 in the future? Check your answer by use of the compound table value.
$20,000 × .7284 = $14,568; $14,568 × 1.3728 = $19,998.95 due to rounding of the table value
Difficulty: 3 Hard
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.; 12-02 (3) Check the present value answer by compounding.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
106) Al Derover wants to buy a used jeep in five years. He estimates the cost will be $13,000. If he invests $8,500 now at a rate of 10% compounded semiannually, will he have enough money to buy the jeep at the end of five years? Show your work.
10% / 2 = 5%, 5 × 2 = 10 periods, $8,500 × 1.6289 = $13,845.65; yes.
Difficulty: 3 Hard
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
107) Abe Frill wants to attend AVP Tech. He will need to have $15,000 seven years from today. How much should Abe put in the bank today (12% quarterly) to reach his goal in the future?
12% / 4 = 3%, 7 × 4 = 28, $15,000 × .4371 = $6,556.50.
Difficulty: 3 Hard
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
108) Ryan deposits $12,000 into a fixed asset account that earns 6% compounded quarterly. What is Ryan's balance at the end of five years?
6% / 4 = 1.5%, 5 × 4 = 20 periods, $12,000 × 1.3469 = $16,162.80
Difficulty: 3 Hard
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
109) Jackie wants to purchase a lakeside condo in Cuba, Missouri, in 20 years. Jackie will invest in a mutual fund earning 8% compounded semiannually. How much will she need to deposit today in that fund to purchase her $100,000 lakeside condo?
8% / 2 = 4%, 20 × 2 = 40, $100,000 × .2083 = $20,830
Difficulty: 3 Hard
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
110) Kelly Kuhn wants to purchase a new car for her son in five years. She estimates that the truck will cost $30,000 after all rebates. Assuming she invests at 8% compounded semiannually for five years, what must she invest today?
8% / 2 = 4%, 5 × 2 = 10, $30,000 × .6756 = $20,268
Difficulty: 3 Hard
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
111) Helga Thalhimer will need to replace the registration software for her agency in five years. She received an estimate that it will cost $40,000 when she is ready to replace. What must Helga deposit today at 6% compounded quarterly to have enough to update her system?
6% / 4 = 1/5%, 5 × 4 = 20, $40,000 × .7425 = $29,700
Difficulty: 3 Hard
Topic: LU 12-02 Present Value-The Big Picture
Learning Objective: 12-02 (2) Compute present value by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
112) Travis Brown deposited $17,500 into Browning Bank, which pays 4% compounded quarterly. Calculate how much Travis will have in his account at the end of seven years.
4% / 4 = 1%, 7 × 4 = 28, $17,500 × 1.3213 = $23,122.75
Difficulty: 3 Hard
Topic: LU 12-01 Compound Interest (Future Value)-The Big Picture
Learning Objective: 12-01 (2) Calculate the compound amount and interest manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
Document Information
Connected Book
Business Math Procedures 13e Test Bank with Answers
By Jeffrey Slater