10 points to the person who can answers these correctly first!!
When interest is added to the principal and interest is again calculated on the new balance, the process is known as compound interest. (Points: 2)
a.) True
b.) False
2. The terms of a loan indicate how often interest is compounded. (Points: 2)
a.) True
b.) False
3. A compound interest table shows the compounded amount per dollar of principal. (Points: 2)
a.) True
b.) False
4. To compound daily means to compound 360 times a year. (Points: 2)
A.) True
B.) False
5. The effective rate of a transaction can be calculated by dividing the interest for one year by the principal. (Points: 2)
A.) True
B.) False
6. The term “nominal rate” means the same as “true rate.” (Points: 2)
A.) True
B.) False
7. The interest on $4,200.00 at 8% compounded semiannually for 10 years is $6,292.40. (Points: 2)
A.) True
B.) False
8. The effective rate is: (Points: 2)
A.) the stated rate
B.) the nominal rate
C.) the true semiannual rate
D.) the true annual rate
E.) none of the above
9. In a loan of 8% compounded quarterly, what is the periodic interest (Points: 2)
A.) 2.5%
B.) 6%
C.) 2%
D.) 4%
10. Present value does not: (Points: 2)
A.) find the present dollar amount
B.) use the tables
C.) know the present dollar amount
D.) know the future value
E.) none of the above
11. Bill deposits $16,500.00 into the National Bank which pays 10% interest that is compounded semiannually. By using Table 10-1, what will Bill have in his account at the end of 5 years? (Points: 2)
A.) $26,786.76
B.) $26,876.69
C.) $6,876.67
D.) $26,573.42
E.) none of the above
12. Josh is having difficulty deciding whether to put his savings in the Mercantile Bank or the Boatmen’s Bank. Mercantile offers a 10% rate compounded quarterly while Boatmen’s offers 12% compounded semiannually. Josh has $40,000.00 to invest and expects to withdraw the money at the end of 5 years. (Use Table 10-1 from the textbook.) The best deal is: (Points: 2)
A.) Mercantile Bank
B.) Mercantile Bank for the last two years
C.) Boatmen’s Bank for the first two years
D.) Boatmen’s Bank
E.) none of the above
13. Don deposited $27,500.00 in Trader’s Bank at an interest rate of 12% compounded quarterly. (Use Table 10-1 from the textbook.) The effective rate was: (Points: 2)
A.) 12.55%
B.) 12%
C.) 13%
D.) 14.0%
E.) none of the above
14. Lisa wants to attend the University of Colorado. She will need to have $80,000.00 five years from today. Lisa is wondering what she will have to put in the bank today so she will have $80,000.00 in five years. Her bank pays 10% compounded quarterly. By using Table 10-3 in the textbook, the amount Lisa will need to deposit is: (Points: 2)
A.) $48,281.68
B.) $49,113.60
C.) $48,821.60
D.) $49,113.06
E.) none of the above
15. John estimates that he will need $15,000.00 for new equipment in 10 years. John decided that he would put aside the money now so that in 10 years the $15,000.00 will be available. His bank offers him 8% interest compounded semiannually. (Use Table 10-3 from the textbook.) How much must John invest? (Points: 2)
A.) $6,845.85
B.) $36,175.71
C.) $6,584.80
D.) $6,845.08
E.) none of the above