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How much will you pay for a $10,000 automobile in 20 years if the inflation rate averages 5% per year for 20 years?

		10,000
		26,532.98
		20,000
		17,589.14

Question 6

You have a $100 bill today. Inflation over the next one year is 5%. What is the purchasing power of that $100 bill in one year?

		105
		100
		95
		5

Question 7

You have $50,000 today and your goal is to have $500,000. If you think you can earn 12% per year, how long would it take you to reach your goal of $500,000?

		10.2 years
		100 years
		20.3 years
		25.5 years

Question 8

John invests $1,000 in a CD that pays 5% interest compounded annually for 3 years. How much is the CD worth at the end of 3 years? Round to nearest penny

Question 9

For a time value calculation, you know the following......FV, PV, interest rate (i) and the amount of the periodic payments (PMT). You have enough information to solve for what?

		the IRR
		the future purchasing power
		the inflation rate
		number of periods (n)

Question 10

Compounding is a term that means you earn interest on previously earned interest.

True

False

Question 11

FV = PV(1+i)^n this is the formula used to calculate___________.

		monthly payment
		number of periods
		present value
		future value

Question 12

A friend owes you money. He offers to pay you $1,000 today, $1,000 a year from now and $1,000 exactly two years from now. If 10% is the prevailing rate you expect on your investments, what is the present value of this arrangement?

		$2,735.54
		$3,000.00
		$826.45
		$2,486.85

Question 13

A friend owes you money. He offers to pay you $1,000 today, $1,000 a year from now and $1,000 exactly two years from now. If you can earn a 10% return on your money, how much money will you have on the date of the last payment (after he makes the last payment)?

Question 14

You borrowed $25,000 from your parents to buy a car. They want their money back in 5 months with interest at 6% (simple interest rate). What is the total amount you must pay them in 5 months (principle plus interest)?

Question 15

Rip Van Winkle made a $1,000 deposit in a bank that offered to pay 9% intererst compounded annually as long as he left it there. He then went into a deep sleep. When he woke up, his balance was $1,411.58. How many years did he sleep?

		2
		4
		6
		not enough information

Question 16

You opened a savings account at a bank and made an initial deposit. The account pays 8% interest compounded annually. You made no additional deposits and in exactly one year you close the account and take out off of the money. The balance at the time you closed the account was $388.80. How much was the original deposit?

Question 17

You opened a bank account that pays 8% interest compounded annually and you made a deposit. You made no more deposits and in exactly two years you withdraw all of the funds and close the account. The balance at the time you closed the account was $419.90. How much did you initially deposit?

Question 18

You make a deposit of $1,000 in an account that pays interest at a rate of 12% compounded quarterly. In two years, the balance will be $__________.

		1,240.00
		1,254.40
		1,266.77
		1,360

Question 19

John won the lottery. The state offers to pay him $1 million up front or a series of 25 payments of $50,000 per year for 25 years. This series of payments is called what?

		a lump sum
		future value payments
		an annuity
		winners bracket

Question 20

If you have a series of ten payments of $1,000 per year for ten years, you can calculate the present value of that stream of payments AND you can calculate the future value of that stream of payments (assuming you are given the interest rate).

True

False

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