Business Smarts - Sample Module for Principles of Finance

Scenario I
A financial services company offers investment vehicles to its clients. Investment A pays an amount of $8,000 in 2 years, and has an annual interest of 6% compounded annually. Investment B pays an amount of $12,000 in 4 years, and has an annual interest of 8% compounded annually. Investment C pays an amount of $15,000 in 8 years, and has an annual interest of 10% compounded annually. Investment D pays an amount of $20,000 in 12 years, and has an annual interest of 6% compounded annually. Investment E pays an amount of $25,000 in 15 years, and has an annual interest of 4% compounded annually.

1) What is the present value of Investment A?

 a)  $7,120.

 b)  $7,210.

 c)  $7,104.

 d)  $8,000.

 e)  None of the above.

2) What is the present value of Investment B?

 a)  $8,120.

 b)  $8,280.

 c)  $8,820.

 d)  $8,800.

 e)  None of the above.

3) What is the present value of Investment C?

 a)  $6,850.

 b)  $6,058.

 c)  $6,508.

 d)  $5,068.

 e)  None of the above.

4) What is the present value of Investment D?

 a)  $9,490.

 b)  $9,940.

 c)  $10,132.

 d)  $10,490.

 e)  None of the above.

5) What is the present value of Investment E?

 a)  $13,812.

 b)  $13,828.

 c)  $13,288.

 d)  $13,882.

 e)  None of the above.

Scenario II
Person Alpha plans to deposit an amount into an account that pays 8% annual interest, paid annually, and to hold it over 9 years with an account balance goal of $10,000. Person Beta plans to deposit an amount into an account that pays 9% annual interest, paid annually, and to hold it over 12 years with an account balance goal of $18,000. Person Gamma plans to deposit an amount into an account that pays 12% annual interest, paid annually, and to hold it over 15 years with an account balance goal of $25,000. Person Delta plans to deposit an amount into an account that pays 15% annual interest, paid annually, and to hold it over 20 years with an account balance goal of $40,000. Person Epsilon plans to deposit an amount into an account that pays 4% annual interest, paid annually, and to hold it over 25 years with an account balance goal of $50,000.

6) What is the deposit amount for person Alpha?

 a)  $5,022.

 b)  $5,200.

 c)  $5,002.

 d)  $10,004.

 e)  None of the above.

7) What is the deposit amount for person Beta?

 a)  $6,491.

 b)  $6,399.

 c)  $6,939.

 d)  $6,149.

 e)  None of the above.

8) What is the deposit amount for person Gamma?

 a)  $4,573.

 b)  $4,568.

 c)  $4,763.

 d)  $4,673.

 e)  None of the above.

9) What is the deposit amount for person Delta?

 a)  $2,444.

 b)  $2,404.

 c)  $2,596.

 d)  $2,496.

 e)  None of the above.

10) What is the deposit amount for person Epsilon?

 a)  $20,480.

 b)  $18,255.

 c)  $18,755.

 d)  $18,575.

 e)  None of the above.

Scenario III
A financial services company offers investment vehicles to its clients. Investment A pays an amount of $8,000 in 2 years, and has an annual interest of 6% compounded semi-annually. Investment B pays an amount of $12,000 in 4 years, and has an annual interest of 8% compounded quarterly. Investment C pays an amount of $15,000 in 8 years, and has an annual interest of 10% compounded quarterly. Investment D pays an amount of $20,000 in 12 years, and has an annual interest of 6% compounded monthly. Investment E pays an amount of $25,000 in 15 years, and has an annual interest of 4% compounded semi-annually.

11) What is the present value of Investment A?

 a)  $7,102.

 b)  $7,108.

 c)  $7,120.

 d)  $7,180.

 e)  None of the above.

12) What is the present value of Investment B?

 a)  $8,741.

 b)  $8,417.

 c)  $8,768.

 d)  $8,820.

 e)  None of the above.

13) What is the present value of Investment C?

 a)  $6,872.

 b)  $6,906.

 c)  $6,508.

 d)  $6,807.

 e)  None of the above.

14) What is the present value of Investment D?

 a)  $9,838.

 b)  $9,787.

 c)  $9,752.

 d)  $9,275.

 e)  None of the above.

15) What is the present value of Investment E?

 a)  $13,802.

 b)  $13,812.

 c)  $13,761.

 d)  $13,882.

 e)  None of the above.

Scenario IV
Person Alpha plans to deposit an amount into an account that pays 8% annual interest, paid quarterly, and to hold it over 10 years with an account balance goal of $10,000. Person Beta plans to deposit an amount into an account that pays 9% annual interest, paid semi-annually, and to hold it over 12 years with an account balance goal of $18,000. Person Gamma plans to deposit an amount into an account that pays 12% annual interest, paid monthly, and to hold it over 15 years with an account balance goal of $25,000. Person Delta plans to deposit an amount into an account that pays 15% annual interest, paid semi-annually, and to hold it over 20 years with an account balance goal of $40,000. Person Epsilon plans to deposit an amount into an account that pays 4% annual interest, paid quarterly, and to hold it over 25 years with an account balance goal of $50,000.

16) What is the deposit amount for person Alpha?

 a)  $5,429.

 b)  $4,564.

 c)  $4,529.

 d)  $4,295.

 e)  None of the above.

17) What is the deposit amount for person Beta?

 a)  $6,399.

 b)  $6,186.

 c)  $6,859.

 d)  $6,259.

 e)  None of the above.

18) What is the deposit amount for person Gamma?

 a)  $4,107.

 b)  $4,170.

 c)  $4,243.

 d)  $4,353.

 e)  None of the above.

19) What is the deposit amount for person Delta?

 a)  $2,261.

 b)  $2,104.

 c)  $2,216.

 d)  $2,126.

 e)  None of the above.

20) What is the deposit amount for person Epsilon?

 a)  $18,756.

 b)  $18,576.

 c)  $18,845.

 d)  $18,485.

 e)  None of the above.

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