Question

1. An investment of $400 today is worth $585.64 at the end of four years if it earns an annual interest rate of 10%. How much interest is earned in the first year and how much in the second year of this information?

a. The interest earned in year one is $40, $44, $48.40 and $53.24, respectively.

b. The interest earned in year one thru four is $46.41 each year.

c. There is not enough information to solve this problem

2. A/an _____ is a series of end-of-the-period cash flows.

a. Annuity

b. Annuity due

c. Perpetuity due

d. None of the above

3. What is EAR if the APR is 10.52% and compounding is daily?

a. Slightly above 10.52%

b. Slightly below 13.31%

c. Slightly above 13.31%

d. Over 13.75%

Answer 1