Fin 300 Chapter 5
8 Questions
| Total Attempts: 32
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Questions and Answers
- 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
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