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Author Question: A two-year investment of 3500 is made today at an annual interest rate of 5.75. Which of the ... (Read 40 times)

jhjkgdfhk

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on: Jul 10, 2018
A two-year investment of 3500 is made today at an annual interest rate of 5.75. Which of the following statements is true?
 
  A) The future value would be greater if the interest rate was higher.
  B) The present value would be greater if the interest rate was higher.
  C) The future value would be greater if the interest rate was lower.
  D) The future value does not change as the interest rate changes.

Question 2

Which of the following will result in a future value greater than 100?
 
  A) PV = 50, r = an annual interest rate of 10, and n = 8 years.
  B) PV = 75, r = an annual interest rate of 12, and n = 3 years.
  C) PV = 90, r = an annual interest rate of 14, and n = 1 year.
  D) All of the future values are greater than 100.


Jmfn03

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Reply #1 on: Jul 10, 2018
Answer to Question 1

Answer: A

Answer to Question 2

Answer: D
Explanation: D) FV = PV  (1 + r)n = 50  (1.10)8 = 107.18
75  (1.12)3 = 105.37
90  (1.14)1 = 102.60


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