Practice Quizzes
Quiz Review

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 semi-annually
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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