1) Jamie earned $180 in interest on her savings account last year. She has decided to leave the $180 in her account so that she can earn interest on the $180 this year. The interest Jamie earns this year on this $180 is referred to as:
a) simple interest.
b) complex interest.
c) accrued interest.
d) interest on interest.
e) discounted interest.
2) The interest rate used to compute the present value of a future cash flow is called the:
a) prime rate.
b) current rate.
c) discount rate.
d) compound rate.
e) simple rate.
3) Ten years from now, you will be inheriting $100,000. What is this inheritance worth to you today if you can earn 5.5 percent interest, compounded annually?
a)$58,543.06
b) $63,215.46
c) $72,419.05
d) $72,798.47
e) $74,003.15
4) You have been told that you need $25,600 today in order to have $100,000 when you retire 35 years from now. What rate of interest was used in the present value computation? Assume interest is compounded annually.
a) 3.97 percent
b) 4.15 percent
c) 4.29 percent
d) 4.53 percent
e) 4.58 percent