1. Suppose you have $1,500 and plan to purchase a 5-year certificate of deposit (CD) that pays 3.5% interest, compounded annually. How much will you have when the CD matures?

1. Suppose you have $1,500 and plan to purchase a 5-year certificate of

deposit (CD) that pays 3.5% interest, compounded annually. How much

will you have when the CD matures?

a. $1,781.53

b. $1,870.61

c. $1,964.14

d. $2,062.34

e. $2,165.46

2. How much would $20,000 due in 50 years be worth today if the discount

rate were 7.5%?

a. $438.03

b. $461.08

c. $485.35

d. $510.89

e. $537.78

3. Suppose the U.S. Treasury offers to sell you a bond for $747.25. No

payments will be made until the bond matures 5 years from now, at which

time it will be redeemed for $1,000. What interest rate would you earn

if you bought this bond at the offer price?

a. 4.37%

b. 4.86%

c. 5.40%

d. 6.00%

e. 6.60%

4. Janice has $5,000 invested in a bank that pays 3.8% annually. How long

will it take for her funds to triple?

a. 23.99

b. 25.26

c. 26.58

d. 27.98

e. 29.46

5. You want to buy a new ski boat 2 years from now, and you plan to save

$8,200 per year, beginning one year from today. You will deposit your

savings in an account that pays 6.2% interest. How much will you have

just after you make the 2nd deposit, 2 years from now?

a. $15,260

b. $16,063

c. $16,908

d. $17,754

e. $18,642

6. You just inherited some money, and a broker offers to sell you an

annuity that pays $5,000 at the end of each year for 20 years. You

could earn 5% on your money in other investments with equal risk. What

is the most you should pay for the annuity?

a. $50,753

b. $53,424

c. $56,236

d. $59,195

e. $62,311

7. Suppose you inherited $275,000 and invested it at 8.25% per year. How

much could you withdraw at the end of each of the next 20 years?

a. $28,532

b. $29,959

c. $31,457

d. $33,030

e. $34,681

8. What’s the future value of $1,500 after 5 years if the appropriate

interest rate is 6%, compounded semiannually?

a. $1,819

b. $1,915

c. $2,016

d. $2,117

e. $2,223