Sample Questions

Principles of Finance

Present Values of Amounts

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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