Fin 300 Chapter 5

8 Questions | Attempts: 35
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    Interest on interest increase every year.

    • True
    • False
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Fin 300 Chapter 5 - Quiz
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  • 2. 

    Simple interest earned each year on an investment remains constant.

    • True

    • False

    Correct Answer
    A. True
  • 3. 

    The process of converting the initial amount into future value is called:

    • Discounting

    • Compounding

    • Both A and B

    • Future conversion

    Correct Answer
    A. Compounding
  • 4. 

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

    • True

    • False

    Correct Answer
    A. True
  • 5. 

    The growth in the future value over time is linear.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    The growth in the future value over time is not linear, but exponential.

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  • 6. 

    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.

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

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

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

    • Cannot be determined

    Correct Answer
    A. $20, 227.29 ; $7,500 ; $ 7,727.79
  • 7. 

    Compounded interest are composed of:

    • Interest on Interest

    • Simple interest

    • Interest on Interest and Simple interest

    • Time value of money

    Correct Answer
    A. Interest on Interest and Simple interest
  • 8. 

    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?

    • $50 ; $61.05

    • $61.05 ; $61.05

    • $50 ; $11.05

    • $161.05

    Correct Answer
    A. $50 ; $11.05

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  • Mar 21, 2022
    Quiz Edited by
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  • Mar 06, 2010
    Quiz Created by
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