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64. Your accountant tells you that if you can continue to earn the current interest rate on your balance of $500 for ten
years, you will have about $983.58. If your accountant is correct, what is the current rate of interest?
a.
5 percent
b.
6 percent
c.
7 percent
d.
8 percent
65. Your financial advisor tells you that if you earn the historical rate of return on a certain mutual fund, then in three
years your $20,000 will grow to $23,152.50. What rate of interest does your financial advisor expect you to earn?
a.
5 percent
b.
6 percent
c.
7 percent
d.
8 percent
66. Robert put $15,000 into an account with a fixed interest rate two years ago and now the account balance is
$16,917.66. What rate of interest did Robert earn?
a.
4.5 percent
b.
5.4 percent
c.
6.2 percent
d.
8.0 percent
67. The price of a bond is equal to the sum of the present values of its future payments. Suppose a certain bond pays $50
one year from today and $1,050 two years from today. What is the price of the bond if the interest rate is 5 percent?
a.
$1,050.00
b.
$1,045.35
c.
$1,000.00
d.
$945.35
68. Tonya put $250 into an account three years ago. The first year he earned 6 percent interest, the second year 7 percent,
and the third year 8 percent. About how about much does Tonya have in her account now?
a.
$302.50
b.
$306.23
c.
$308.67
d.
$309.39
69. Imagine that two years ago you inherited $20,000 and put it into an account paying a fixed 8 percent annual interest
rate. How much money do you have in your account now?
a.
$22,880.00
b.
$23,200.00
c.
$23,232.00
d.
$23,328.00
70. You are given three options. You may have the balance in an account that has been collecting 5 percent interest for 20
years, the balance in an account that has been collecting 10 percent interest for 10 years, or the balance in an account that
has been collecting 20 percent interest for five years. Each account had the same original balance. Which account now has
the lowest balance?
a.
the first one
b.
the second one
c.
the third one
d.
They all have the same balance.
71. Daniel has $300 in a bank account. Some years ago he put $213.20 into this account, and it has earned 5 percent
interest every year since then. How many years ago did Daniel open his account?
a.
4 years
b.
5 years
c.
6 years
d.
7 years
72. When he was 18, Hussam put $100 into an account at an interest rate of 8 percent. He now has $158.69 in this
account. For how many years did Hussam leave this money in his account?
a.
5 years
b.
6 years
c.
7 years
d.
8 years
73. Four years ago Ollie deposited some money into an account. He earned 5 percent interest on this account and now it
has a balance of $303.88. About how much money did Ollie deposit into his account when he opened it?
a.
$210
b.
$220
c.
$240
d.
$250
74. Two years ago Lenny put some money into an account. He earned 6 percent interest on this account and now he has
about $1,000. About how much did Lenny deposit into his account two years ago?
a.
about $860
b.
about $870
c.
about $880
d.
about $890
75. On May 25, 1980 three pals graduated from high school, pooled together $3,000 and put the money into an account
promising to pay 8% for the next 30 years. On May 25, 2010 they withdrew all the money from the account. To the
nearest dollar, how much did they withdraw?
a.
$25,962
b.
$27,297
c.
$30,188
d.
None of the above are correct to the nearest dollar.
76. Zoey wants to have about $750,000 when she retires in 10 years. She has $300,000 to deposit now. At which of the
following interest rates would Zoey’s deposit come closest to $750,000 after 10 years?
a.
9.6 percent
b.
9.9 percent
c.
10.2 percent
d.
10.5 percent
77. You want to have $100,000 in five years. If the interest rate is 8 percent, about how much do you need to have today?
a.
$66,225.25
b.
$67,556.42
c.
$68,058.32
d.
$71,428.57
78. Al, Ralph, and Stan are all intending to retire. Each currently has $1 million in assets. Al will earn 16% interest and
retire in two years. Ralph will earn 8% interest and retire in four years. Stan will earn 4% interest and retire in eight years.
Who will have the largest sum when he retires?
a.
Al
b.
Ralph
c.
Stan
d.
They all retire with the same amount.
79. Sage decides to cash in all his savings to open a recording studio. He has three accounts to cash in. The first earned 9
percent for two years. The second earned 6 percent for three years. And the last earned 3 percent for six years. Supposing
he started with $5,000 in each account, from which account will he get the most cash?
a.
the two-year account at 9 percent
b.
the three-year account at 6 percent
c.
the six-year account at 3 percent
d.
The accounts are all worth the same.
80. Which of the following is the correct expression for finding the present value of a $1,000 payment one year from
today if the interest rate is 6 percent?
a.
$1,000 (1.06)
b.
$1,000(1.06)
c.
$1,000/(1.06)
d.
None of the above is correct.
81. What is the present value of a payment of $100 to be made one year from today?
a.
$100*(1 + r)
b.
$100/(1 + r)
c.
$100 - $100 r
d.
$100 - (1 + r)/$100
82. Which of the following is the correct expression for finding the present value of a $500 payment two years from today
if the interest rate is 6 percent?
a.
$500/(1.06)2
b.
$500 - 500(1.06)2
c.
$500/(1.02)6
d.
None of the above is correct.
83. A scholarship gives you $1,000 today and promises to pay you $1,000 one year from today. What is the present value
of these payments?
a.
$2,000/(1 + r)2.
b.
$1,000 + $1,000/(1 + r)
c.
$1,000/(1 + r) + $1,000/(1 + r)2
d.
$1,000(1 + r) + $1,000(1 + r)2
84. Which of the following changes would decrease the present value of a future payment?
a.
a decrease in the size of the payment
b.
an increase in the time until the payment is made
c.
an increase in the interest rate
d.
All of the above are correct.
85. Which of the following changes would decrease the present value of a future payment?
a.
an increase in the size of the payment
b.
an increase in the time until the payment is made
c.
a decrease in the interest rate
d.
All of the above are correct.
86. Which of the following changes would increase the present value of a future payment?
a.
a decrease in the size of the payment
b.
an increase in the time until the payment is made
c.
a decrease in the interest rate
d.
All of the above are correct.
87. The present value of a payment to be made in the future falls as
a.
the interest rate rises and the time until the payment is made increases.
b.
the interest rate rises and the time until the payment is made decreases.
c.
the interest rate falls and the time until the payment is made increases.
d.
the interest rate falls and the time until the payment is made decreases.
88. You are expecting to receive $750 at some time in the future. Which of the following would unambiguously decrease
the present value of this future payment?
a.
Interest rates rise and you get the payment sooner.
b.
Interest rates rise and you have to wait longer for the payment.
c.
Interest rates fall and you get the payment sooner.
d.
Interest rates fall and you have to wait longer to get the payment.
89. You are expecting to receive $3,500 at some time in the future. Which of the following would unambiguously increase
the present value of this future payment?
a.
Interest rates rise and you get the payment sooner.
b.
Interest rates rise and you have to wait longer for the payment.
c.
Interest rates fall and you get the payment sooner.
d.
Interest rates fall and you have to wait longer to get the payment.
90. You have been promised a payment of $250,000 in the future. In which case is the present value of this payment
highest?
a.
You receive the payment 3 years from now and the interest rate is 8 percent.
b.
You receive the payment 3 years from now and the interest rate is 6 percent.
c.
You receive the payment 2 years from now and the interest rate is 8 percent.
d.
You receive the payment 2 years from now and the interest rate is 6 percent.
91. You have been promised a payment of $400 in the future. In which of the following cases is the present value of this
payment the lowest?
a.
You receive the payment 4 years from now and the interest rate is 4 percent.
b.
You receive the payment 4 years from now and the interest rate is 5 percent.
c.
You receive the payment 5 years from now and the interest rate is 4 percent.
d.
You receive the payment 5 years from now and the interest rate is 5 percent.
92. At which interest rate is the present value of $80.25 one year from today equal to $75 today?
a.
4 percent
b.
5 percent
c.
6 percent
d.
7 percent
93. At which interest rate is the present value of $95.40 one year from today equal to $90 today?
a.
4 percent
b.
5 percent
c.
6 percent
d.
7 percent
94. At which interest rate is the present value of $168.54 two years from today equal to $150 today?
a.
4 percent
b.
5 percent
c.
6 percent
d.
None of the above would give a present value within a cent of $162.24.
95. At which interest rate is the present value of $196.85 three years from today equal to $175 today?
a.
2 percent
b.
4 percent
c.
6 percent
d.
8 percent
96. What is the present value of a payment of $100 one year from today if the interest rate is 5 percent?
a.
$95.50
b.
$95.24
c.
$95.00
d.
None of the above are correct to the nearest cent.
97. What is the present value of a payment of $150 one year from today if the interest rate is 6 percent?
a.
$141.11
b.
$141.36
c.
$141.75
d.
None of the above are correct to the nearest cent.
98. What is the present value of a payment of $250 one year from today if the interest rate is 4 percent?
a.
$240.38
b.
$242.24
c.
$244.40
d.
None of the above are correct to the nearest cent.
99. At which interest rate is the present value of $260.10 two years from today equal to $250 today?
a.
2 percent
b.
3 percent
c.
4 percent
d.
5 percent
100. At which interest rate is the present value of $145.80 two years from today equal to $125 today?
a.
2 percent
b.
4 percent
c.
6 percent
d.
8 percent
101. At which interest rate is the present value of $35.00 two years from today equal to about $30.00 today?
a.
5 percent
b.
6 percent
c.
7 percent
d.
8 percent
102. What is the present value of a payment of $100 to be made one year from today if the interest rate is 6 percent?
a.
$105.26
b.
$105.00
c.
$97.24
d.
$94.34
103. Of the following interest rates, which is the highest one at which you would prefer to have $170 ten years from today
instead of $100 today?
a.
3 percent
b.
5 percent
c.
7 percent
d.
9 percent
104. What is the present value of a payment of $200 to be made one year from today if the interest rate is 10 percent?
a.
$180
b.
$181.82
c.
$220
d.
$222.22
105. If the interest rate is 4.5 percent, what is the present value of a payment of $500 to be made one year from today?
a.
$457.14
b.
$468.02
c.
$478.47
d.
None of the above are correct to the nearest cent.
106. Of the following interest rates, which is the highest one at which the present value of $200 ten years from today is
greater than $150?
a.
2 percent
b.
4 percent
c.
6 percent
d.
8 percent
107. You have a bond that entitles you to a one-time payment of $10,000 one year from now. The interest rate is 10
percent per year. How much is the bond worth today?
a.
$9,090.91
b.
$10,000.00
c.
$8,264.46
d.
$9,523.81
108. Cleo promises to pay Jacques $1,000 two years from today. If the interest rate is 4 percent, then how much is this
future payment worth today?
a.
$924.56
b.
$931.44
c.
$937.87
d.
None of the above are correct to the nearest cent.
109. At which interest rate is the present value of $183.60 two years from today equal to about $173.06 today?
a.
2 percent
b.
3 percent
c.
4 percent
d.
5 percent
110. At which interest rate is the present value of $360 three years from today equal to about $310 today?
a.
4.7 percent
b.
5.1 percent
c.
5.5 percent
d.
5.9 percent
111. Assuming the interest rate is 6 percent, which of the following has the greatest present value?
a.
$300 paid in two years
b.
$150 paid in one year plus $140 paid in two years
c.
$100 paid today plus $100 paid in one year plus $100 paid in two years
d.
$285 today
112. Assuming the interest rate is 5 percent, which of the following has the greatest present value?
a.
$240 paid in three years
b.
$225 paid in two years
c.
$210 paid in one year
d.
$200 today
113. Suppose the interest rate is 4 percent. Which of the following has the greatest present value?
a.
$100 today plus $190 one year from today
b.
$150 today plus $140 one year from today
c.
$200 today plus $90 one year from today
d.
$250 today plus $40 one year from today
114. Suppose the interest rate is 7 percent. Consider four payment options:
Option A: $500 today.
Option B: $550 one year from today.
Option C: $575 two years from today.
Option D: $600 three years from today.
Which of the payments has the highest present value today?
a.
Option A
b.
Option B
c.
Option C
d.
Option D
115. Suppose the interest rate is 7 percent. Consider four payment options:
Option A: $500 today.
Option B: $550 one year from today.
Option C: $575 two years from today.
Option D: $600 three years from today.
Which of the payments has the lowest present value today?
a.
Option A
b.
Option B
c.
Option C
d.
Option D
116. Suppose the interest rate is 8 percent. Consider three payment options:
1. $200 today.
2. $220 one year from today.
3. $240 two years from today.
Which of the following is correct?
a.
Option 1 has the highest present value and Option 2 has the lowest.
b.
Option 2 has the highest present value and Option 3 has the lowest.
c.
Option 3 has the highest present value and Option 1 has the lowest.
d.
None of the above is correct.
117. Suppose the interest rate is 5 percent. Consider three payment options:
1. $500 today.
2. $520 one year from today.
3. $550 two years from today.
Which of the following is correct?
a.
1 has the lowest present value and 3 has the highest.
b.
2 has the lowest present value and 1 has the highest.
c.
3 has the lowest present value and 2 has the highest.
d.
None of the above is correct.
118. Which, if any, of the present values below are computed correctly?
a.
A payment of $100 to be received one year from today, with a 2 percent interest rate, has a present value of
$98.81.
b.
A payment of $200 to be received two years from today, with a 3 percent interest rate, has a present value of
$188.52.
c.
A payment of $300 to be received three years from today, with a 4 percent interest rate, has a present value of
$234.34.
d.
None of the above are correct to the nearest cent.
119. Suppose the interest rate is 8 percent. Consider three payment options.
1. $300 today.
2. $330 one year from today.
3. $360 two years from today.
Which of the following is correct?
a.
1 has the highest present value and 2 has the lowest.
b.
2 has the highest present value and 3 has the lowest.
c.
3 has the highest present value and 1 has the lowest.
d.
None of the above is correct.
120. Which, if any, of the present values below are correctly computed?
a.
A payment of $1,000 to be received one year from today, with a 8 percent interest rate, has a present value of
$945.45.
b.
A payment of $1,000 to be received one year from today, with a 9 percent interest rate, has a present value of
$911.11.
c.
A payment of $1,000 to be received one year from today, with a 10 percent interest rate, has a present value of
$905.06.
d.
None of the above are correct to the nearest cent.
121. Which of the following has a present value of $100?
a.
$109.12 in two years when the interest rate is 4 percent
b.
$113.98 in two years when the interest rate is 6 percent
c.
$116.64 in two years when the interest rate is 8 percent
d.
$123.17 in two years when the interest rate is 10 percent
122. You have a choice among three options. Option 1: receive $900 immediately. Option 2: receive $1,200 one year from
now. Option 3: receive $2,000 five years from now. The interest rate is 15 percent. Rank these three options from highest
present value to lowest present value.
a.
Option 1; Option 2; Option 3
b.
Option 3; Option 2; Option 1
c.
Option 2; Option 3; Option 1
d.
Option 3; Option 1; Option 2
123. Suppose you win a small lottery and you are given the following choice: You can (1) receive an immediate payment
of $10,000 or (2) three annual payments, each in the amount of $3,600, with the first payment coming one year from now,
the second two years from now, and the third three years from now. You would choose to take the three annual payments
if the interest rate is
a.
2 percent, but not if the interest rate is 3 percent.
b.
3 percent, but not if the interest rate is 4 percent.
c.
4 percent, but not if the interest rate is 5 percent.
d.
5 percent, but not if the interest rate is 6 percent.
124. A judge requires Harry to make a payment to Sally. The judge says that Harry can pay her either $10,000 today or
$12,000 two years from today. Of the following interest rates, which is the highest one at which Harry would be better off
paying the money today?
a.
4 percent
b.
6 percent
c.
9 percent
d.
11 percent
