Answer questions A- J:

Question A

You have $2,000 to invest and hope to eventually have $10,000. What interest rate must you earn in order to reach your goal in 25 years?

Question B

You have just invested in a bank account that earns 2% per year. How long will it take to double your money?

Question C

A gallon of gas costs $3.00 in 2018. If inflation will be 3.5%, assuming the price of gasoline only increases with inflation, how much a gallon of gas cost in 40 years?

Question D

Compounding is:

A)	The process of computing the future value from the number of time periods.

B)	The process of computing the present value from the future value.

C)	The process of computing the future value from the present value.

D)	The process of computing the amount of interest from the present value.

Question E

Time Value of Money concepts are based on the idea that a dollar today is worth less than a dollar in the future.

True

False

Question F

You win the lottery! You can either take the money now or wait 25 years and receive it then. If you get it now, then the best investment that you found is a 25 year CD that will earn 4%/year. The lottery offers you $5,000,000 if take the winnings today or $15,000,000 if you wait 25 years. Assuming their are no other risks, taxes, or opportunity costs (i.e. missing out on the fun of having $5 million now is not a deciding factor), what should you do?

A)	Take the $5,000,000 now and invest it in the CD

B)	Take the $15,000,000 in 25 years

Question G

Holding present value and discount rate constant, the greater the number of periods...

A)	the lower the future value.

B)	the greater the future value.

C)	has no impact on future value.

Question H

Holding future value and discount rate constant, the greater the number of periods...

A)	the lower the present value.

B)	the greater the present value.

C)	has no impact on present value.

Question I

When Amy was four years old, she received $500 from her relatives as a birthday gift. Her mom helped her deposit the money in a bank account. The interest rate on the account has been fixed at 5% compounded monthly. Now Amy is 16 years old. How much does she have on the account?

Question J

Jeans daughter is a freshman at a university. She plans to study abroad during her last semester at the university. The abroad program will cost her $5000. Jean wants to pay for the program. How much money does Jean have to set aside today in order to pay for the program three and a half years from now? The money will be invested in a CD which pays 6% interest rate compounded annually.