Fin 300 Chapter 5

8 Questions | Total Attempts: 32

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Fin 300 Chapter 5

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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