1. What is the present value of a 10-year $1,000.00 ordinary annuity discounted back to the present at 6%? $7,918.48

$7,360.09

$1,651.51

$558.39
2. In the second period, interest is earned on the principal as well as on the interest from the first period. The type of interest described in the previous statement is

discount interest.

simple interest.

fixed interest.

compound interest.
3. After selling the family farm and splitting the proceeds with your siblings, your inheritance is $66,475. You plan to use that money to send your quadruplets to college in 10 years. You estimate that tuition will cost $200,000. What interest rate do you need to earn on your investment to meet your financial goals?

22.4%

–32%

41%

12%
4. On graduating from college, you receive $3,000 in gifts from family and friends. You want to invest it for later use as a $15,000 down payment on a house. You have found an opportunity that locks in a 10% annual interest rate. How many years will it take you to turn your graduation gifts into a down payment?

162 years

10 years

2.32 years

17 years
5. What is present value of an asset that yields $500.00 in five years and $1,000.00 in 10 years if the discount rate is 6%?

$9466.27

$373.63

$56.78

$932.02
6. What is the future value of $1,000.00 at 4% interest compounded annually after five years?

$5,378.24

$1,216.65

$5,416.32

$3,125,000
7. What is the present value of $1,000.00 to be received five years from today if the discount rate is 4%?

$5,273.75

$185.93

$0.32

$821.93
8. What is the present value of an asset that yields $1,500.00 in five years and $3,000.00 in 10 years if the discount rate is 8%?

$26,119.31

$1,020.87

$87.79

$2,410.46
9. What is the present value of a $1,000.00 perpetuity discounted back to the present at 6%?

$16,666.67

$60

$166.67

$1,666.67
10 .If an investor wants to know the present value of an investment, she is interested in

annuities.

compounding.

discounting.

annuities due.