1.
Reinvesting
interest paid on an investment’s principal is earning interest on interest or 
A:
compound
interest
B:
reinvesting
C:
simple
interest
D:
compounding
semiannually

2.
The value
of an investment at some future point in time is also known as 
A:
present
value
B:
future value
C:
compounded annuity
D:
the time
value of money

3.
When you
leave your $7.00 interest payment in your savings account you are 
A:
creating
wealth
B:
establishing a savings habit
C:
reinvesting
D:
losing
money – invest it elsewhere

4.
The current
value in today’s dollars of a future sum of money is called 
A:
future
value
B:
future worth
C:
compounded value
D:
present
value

5.
_____________ states that a dollar today is worth more than a dollar in the
future 
A:
time value
of money
B:
future value
C:
present
value
D:
compounded value

6.
The
discount rate is used to bring ___________ __________ back to the __________ 
A:
current,
dollars, present
B:
future, dollars, present
C:
current,
interest, present
D:
future,
interest, present

7.
The time
value of money allows a small sum to accumulate over the years into 
A:
a larger
sum
B:
a
modest sum
C:
possibly
a very large sum depending on the interest rate and time period
D:
a modest
sum that will be eroded by inflation

8.
An
investment of $200 at 10% yields $242 in two years. The $242 is known as
the 
A:
present
value
B:
compound interest
C:
principal
plus interest
D:
future
value

9.
John Madrid
put $1,000 into a mutual fund yielding 18. When will it double in value? 
A:
four years
B:
two years
C:
three
years
D:
five
years

10.
This
helpful investment rule tells you how many years it takes for a sum of money
to double 
A:
compound
interest
B:
rule of 72
C:
rule of
100
D:
future
value

11.
Interest compounded annually is reinvested and compounded 
A:
at the
beginning of each year
B:
at
the end of the fiscal year
C:
at the end
of the calendar year
D:
each year
on the anniversary of the account

12.
What
interest rate would be required to double a sum in six years? 
A:
4%
B:
8%
C:
16%
D:
12%

13.
Your money
will grow_________ as the compounding period becomes _________. 
A:
faster,
shorter
B:
faster, longer
C:
slower,
shorter
D:
the same,
shorter

14.
Who will
have a larger accumulation of money invested at 9% over the next 42 years? 
A:
Jerry
waits for 14 years and saves $1,200 per year for 28 years
B:
Jim saves $1,200 per year and stops after 14 years
C:
Jeremy
waits for 14 years and saves $1,200 per year for 14 years then stops
D:
Joey
waits for 10 years and saves $1,500 per year for 14 years then stops

15.
Doubling
the interest rate on your investment will _____________ the accumulation 
A:
double
B:
less
than double
C:
greatly
increase (over time)
D:
double
(depending on the number of years)

16.
The interest
rate after adjusting for nonannual compounding is called 
A:
annual
yield
B:
annual interest rate
C:
effective
yield
D:
effective
annual interest rate

17.
A series of
equal dollar payments at the end of each period for “x” number of time periods
is 
A:
an annuity
B:
a
compound annuity
C:
an
annuity due
D:
a
deferred annuity

18.
Growing
money that has been invested in equal sums at each year’s end for “x” years is 
A:
an annuity
B:
a
compound annuity
C:
an
annuity due
D:
a
deferred annuity

19.
A compound
annuity uses the principles of

A:
reinvesting and risk
B:
compound interest and risk
C:
reinvesting and compound interest
D:
compound
interest and present value

20.
A
perpetuity is an annuity that 
A:
stops at
death of the annuitant
B:
stops at the death of the annuitant’s spouse
C:
stops at
the deaths of the annuitant’s heirs
D:
continues
forever

21.
Which one
of the following is the “enemy” of compound interest? 
A:
inflation
B:
unemployment
C:
simple
interest
D:
recession

22.
What is the
maximum that you would be willing to pay for an IOU for $500 due in one year
if you want to earn at least 16%? 
A:
$580.00
B:
$431.03
C:
$500.00
D:
$445.33

23.
You have
just placed $500 in a bank account that earns 6%. How much will you have on
deposit after 6 years? 
A:
$352.48
B:
$3,487.66
C:
$709.26
D:
$2,458.66

24.
As a future
graduation present, you uncle has just placed $6,000 in a bank account that
will earn 6%. How much will be on deposit when you graduate in four years? 
A:
$1,731.55
B:
$4,752.56
C:
$26,247.70
D:
$7,574.86

25.
Suppose
that you invested $100 in a bank account that earned 10% How much would you
have on deposit at the end of 10 years? 
A:
$259.37
B:
$38.55
C:
$1,593.74
D:
$614.46



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