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- StudyBlue
- Georgia
- Georgia Institute of Technology
- Finance Chapter 5

Hannah B.

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You are investing $100today in a savings account at your local bank. Which one of the following termsrefers to the value of this investment one year from now?

future value

Tracy invested $1,000 fiveyears ago and earns 4 percent interest on her investment. By leaving herinterest earnings in her account, she increases the amount of interest sheearns each year. The way she is handling her interest income is referred to aswhich one of the following?

compounding

Steve invested $100 twoyears ago at 10 percent interest. The first year, he earned $10 interest on his$100 investment. He reinvested the $10. The second year, he earned $11 intereston his $110 investment. The extra $1 he earned in interest the second year isreferred to as:

interest on interest

Interest earned on both theinitial principal and the interest reinvested from prior periods iscalled:

compound interest

Sara invested $500 sixyears ago at 5 percent interest. She spends her earnings as soon as she earnsany interest so she only receives interest on her initial $500 investment.Which type of interest is Sara earning?

simple interest

Shelley won a lottery andwill receive $1,000 a year for the next ten years. The value of her winningstoday discounted at her discount rate is called which one of thefollowing?

present value

A. Sue will have less money when she retiresthan Neal.

Which one of the followingvariables is the exponent in the present value formula?

Which one of the followingwill produce the highest present value interest factor?

What is the relationshipbetween present value and future value interest factors?

What is the future value of$7,189 invested for 23 years at 9.25 percent compounded annually?

One year ago, you invested$1,800. Today it is worth $1,924.62. What rate of interest did you earn?

According to the Rule of72, you can do which one of the following?

At 11 percent interest, howlong would it take to quadruple your money

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