Finance 310 Exam
The value in t years of an investment made today at interest rate r is called the
_________ of your investment.
A: Present value
B: Compound value
C: Future value
D: Simple value
A dollar invested today at 8.0 percent interest compounded annually will be worth
_________ three years from now.
A: $1.08
B: $1.1664
C: $1.2597
FV = $1.00 x (1 + 0.8)^3
A dollar invested today at 8.0 percent simple annual interest will be worth
__________three years from now.
A: $1.16
B: $1.26
C: $1.24
With simple interest, the bank calculates interest only on the principle investment: $1.00
+$.08+$0.8+$0.8 = $1.24. Do not confuse this with compound interest, which computes
interest earned on interest.
Assume you have $100 to invest today. Investing it at 5% interest compounded annually
will yield ________ in 10 years, while investing it at 6% interest compounded annually
will yield ___________ in 10 years.
A: $179.08 ; $162,89
B: $162.89; $179.08
C: $179.08; $179.08
D: $162.89; $175.00
Joseph signs a contract with a company that will pay him $25,000. Following the
principles of the time value of money, Joseph would be best off if he received payment:
A: at the beginning of the project