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Chap 7

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QUESTION 1 1. Gerold invested $6,200 in an account that pays 5 percent simple interest. How much money will he have in ten years? | A. | $8,710 | | B. | $9,000 | | C. | $9,300 | | D. | $9,678 | | E. | $10,099 |
10 points
QUESTION 2 1. According to the Rule of 72, you can do which one of the following? | A. | double your money in five years at 7.2 percent interest | | B. | double your money in 7.2 years at 8 percent interest | | C. | double your money in 8 years at 9 percent interest | | D. | triple your money in 7.2 years at 5 percent interest | | E. | triple your money at 10 percent interest in 7.2 years |
10 points
QUESTION 3 1. You are comparing two annuities which offer quarterly payments of $2,500 for five years and pay 0.75 interest per month. Annuity A will pay you on the first of ech month while annuity B will pay you on the last day of each month. Which one of the following statements is correct concerning these two annuities? | A. | These two annuties have equal present values but unequal futures values at the end of year five. | | B. | These two annuities have equal present values as of today and equal future values at the end of year five. | | C. | Annuity B is an annuity due. | | D. | Annuity A has a smaller future value than annuity B. | | E. | Annuity B has a smaller present value than annuity A. |
10 points
QUESTION 4 1. How is the principal amount of an interest-only loan repaid? | A. | The principal is forgiven over the loan period so does not have to be repaid. | | B. | The principal is repaid in equal increments and included in each loan payment. | | C. | The principal is repaid in a lump sum at the end of the loan period. | | D. | The principal is repaid in equal annual payments. | | E. | The principal is repaid in increasing increments through regular

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