**S U F F O L K U N I V E R S I T Y**

**BUSINESS FINANCE**

** Instructor: Ki C. Han**

Name _____________________

1. ( T or F ) Other things being the same, the future value of an annuity is higher than that of an annuity due.

2. ( T or F ) As the interest rate increases, the future value of a lump sum increases.

3. ( T or F ) Other things being the same, depositors can earn more interest under quarterly compounding than under monthly compounding.

4. If an investor invests $2,500 in a savings account that pays 5% interest, after 20 years he or she will have accumulated _______.

a. $3,442 b. $5,000 c. $6,221 d. $6,633

5. If an investment earns 11% per year, how long would it take for a sum of money to triple in size?

a. between 6 & 7 years b. between 8 & 9 years c. between 10 & 11 years d. between 12 & 13 years

6. You want to retire a millionaire. How much must you invest at the end of **each month** for the next 40 years to accumulate $1,000,000? The interest rate is 12% per year.

a. $85 b. $162 c. $320 d. $755

7. Your broker offers to sell you a note for $13,250 that will pay $2,500.50 per year for 10 years. If you buy the note, what rate of interest will you be earning?

a. 7.2% b. 10.5% c. 13.6% d. 15.3%

8. If an investment of $10,000 today earns 9% in each of the next two years, and then earns 5% per year for three years after that, how much will the investment be worth at the end of the five years?

a. $13,300 b. $13,754 c. $13,794 d. $14,402

9. You deposit a single amount of $50,000 in a savings account that pays 7.6% annual interest (compounded quarterly). How much will you have at the end of four and one-half years?

a. $68,145 b. $70,163 c. $72,664 d. $75,050

10. You will deposit $5,000 at the end of each of next 5 years. If the interest rate is 8% (annual compounding), how much will you have accumulated in 20 years?

a. $33,460.59 b. $57,667.89 c. $72,894.90 d. $93,049.24

11. You have just been notified that you won the lottery. You will be paid 10 annual payments of $1,000,000, with the first one starting today. Using an interest rate of 8% (annual compounding), how much did you really win (in terms of present value)?

a. $6,345,879.98 b. $7,246,887.91 c. $8,564,778.01 d. $10,000,000.00

12. Ten years ago you invested $10,000. Today you received $25,000. What is your annual return?

a. 9.6% b. 10.5% c. 12.7% d. 13.3%