Question

1. The present value of an ordinary annuity:

a.is equal to the amount of money invested in the future

b. represents a lump sum payment

c. determines the amount of money that needs to be invested today

d.can be determined only using the tables

2. Which of the following statements is correct?

a. present value may only be found using a table

b.present value concerns both the present, and future values

c.present value concerns primarily the future value

d.present value may only be found using realistic interest rate assumptions

3. Which of the following statements is correct?

a.The average daily balance is equal to the sum of the daily balances divided by the number of days in the billing cycle. b. With open-end loans, an individual makes regular fixed dollar payments for a specified period of time.

c.An open-end loan disallows additional credit until the initial amount is paid off.

d.The average daily balance is the same as the average balance.

4. The effective interest rate is best defined as:

a. yield to interest

b. the simple interest rate that is equivalent to a compound rate

c. manual compounding

d. annual percentage quota

5. If you count the specific number of days in a month, it is called time.

a. ordinary

b. approximate

c.variable

d. exact

6. The primary advantage of a Roth IRA, when compared to a traditional IRA, is that:

a. qualified distributions are tax free when withdrawn

b. all are true regarding a Roth IRA

c. only employees of public education entities can use them

d. contributions are tax-deductible

7. Interest compounding:

a.results in less interest than simple interest

b.calculates the present when the future is known

c.calculates interest periodically

d. is done only once a year

8. A compound interest table shows the compounded amount per dollar of principal.

True

False

9. "Interest earned on interest" is another way of saying:

a.compound interest

b. simple interest

c. simple discount

d. compound discou

10. Unlike simple interest, compound interest is never found using a:

a.365-day year

b.formula

c.360-day year

d.manual compounding

11. When interest is added to the principal amount and then interest is calculated on this new amount, the process is called:

a.present value

b.compound interest

c.simple interest

d.single interest

Answer 1