Accounts Case

1. Simple interest is computed on the principal and on any interest that has not been paid or withdrawn.

A. True

B. False

Compound interest is computed on the principal and on any interest that has not been paid or withdrawn. Simple interest is computed on the principal amount only.

2. Which of the following is not one of the elements required to calculate the amount of interest?

A. Interest rate (i)

B. Future value (FV)

C. Time (n)

D. Principal (p)

3. What is the future value of $1, which is invested for seven years at an annual compound interest rate of 9%?

A. $1.95

B. $9.20

C. $1.83

D. $3.34

4. You would like to buy a new car in five years. Presently, the car you want costs $20,000. What will that car cost in five years if the price inflates by 5% each year?

A. $25,526

B. $25,000

C. $15,671

D. $16,439

5. How much is the future value of $100,000 in six years which earns 10% annual interest?

A. $160,000

B. $177,156

C. $171,756

D. $179,085

6. Justin Beiber wants to save enough money to make a down payment on a new home. He decided to put $10,000 into a savings account at the end of each of the next ten years. If he earns 4% compound interest, how much money will he have at the end of the ten years?

A. $104,000

B. $140,000

C. $120,000

D. $120,061

7. Jose Alicia wants to save enough money to attend college in ten years. He decides to put $5,000 into a savings account at the end of each of the next ten years. If he earns 6% compound interest, how much money will he have at the end of the ten years?

A. $50,000

B. $53,000

C. $69,504

D. $65,904

8. What is the process of determining the present value called?

A. Amortizing