# Fin 300 Chapter 5

8 Questions | Total Attempts: 32  Settings  We will get 100 on our test!

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• 1.
Say you leave \$100 invested in the bank savings account at 10 percent interest for five years. What is the simple interest and the interest on interest for the five year period?
• A.

\$50 ; \$61.05

• B.

\$61.05 ; \$61.05

• C.

\$50 ; \$11.05

• D.

\$161.05

• 2.
Simple interest earned each year on an investment remains constant.
• A.

True

• B.

False

• 3.
Interest on interest increase every year.
• A.

True

• B.

False

• 4.
The growth in the future value over time is linear.
• A.

True

• B.

False

• 5.
What is the future value of \$5,000 invested for 10 years at 15 percent interest. Also, what is the simple interest and interest on interest for the 10 year period.
• A.

20, 227.29 ; \$7,500 ; \$12,727.79

• B.

\$20, 227.29 ; \$7,500 ; \$ 7,727.79

• C.

\$20,227.79 ; \$12,500 ; \$ 7,727.79

• D.

Cannot be determined

• 6.
The more frequently interest payments are compounded, the larger the future value of \$1 for a given time period.
• A.

True

• B.

False

• 7.
Compounded interest are composed of:
• A.

Interest on Interest

• B.

Simple interest

• C.

Interest on Interest and Simple interest

• D.

Time value of money

• 8.
The process of converting the initial amount into future value is called:
• A.

Discounting

• B.

Compounding

• C.

Both A and B

• D.

Future conversion