Skills Check

image Skills Check

Question 21.1

1. Simple interest is an example of

  1. linear growth.
  2. arithmetic growth.
  3. constant growth.

1.

a, b, or c

Question 21.2

2. If a savings account pays 3% simple annual interest, a deposit of $250 will earn __________ in 2 years.

2.

$15

Question 21.3

3. An 18% annual rate on a credit-card balance is an example of

  1. an effective rate.
  2. a nominal rate.
  3. an adjusted rate.

3.

b

Question 21.4

4. If you deposit $1000 at 6.2% simple interest, the balance after three years is _________.

4.

$1186.00

Question 21.5

5. Suppose that you deposit $180 at the beginning of each year into a savings account that pays 2% simple interest per year at the end of the year. After two years, the amount in the account is

  1. $360.00.
  2. $370.80.
  3. $374.40.

5.

b

Question 21.6

6. If $800 is invested for one year at 6% compounded quarterly, the amount of interest earned is ________.

6.

$49.09

Question 21.7

7. If a single deposit is made into a compound interest CD, the account earns

  1. interest only for the first period.
  2. the same amount of interest each period.
  3. more interest in each subsequent period.

7.

c

Question 21.8

8. If you deposit $1000 at 6.2% interest compounded quarterly, the balance after three years is __________.

8.

$1202.71

Question 21.9

9. Compound interest is an example of

  1. geometric growth.
  2. exponential growth.
  3. humongous growth.

9.

a (or b)

Question 21.10

10. Suppose that you deposit $15 at the end of each month into a savings account that pays 2% interest compounded monthly. After a year, __________ is in the account.

10.

$181.66

Question 21.11

11. Compound interest is paid on

  1. just the initial principal.
  2. the current balance.
  3. just the accumulated interest.

11.

b

Question 21.12

12. Suppose that you deposit $10 at the end of each day into a savings account that pays 2% interest compounded daily. After a year, __________ is in the account.

12.

$3686.64 ($3696.74 in a leap year)

Question 21.13

13. Suppose that you open an account that pays 1% interest compounded monthly with a deposit of $1000. At the end of one year, you will have approximately

  1. $1010.
  2. $1120.
  3. $1200.

13.

a

Question 21.14

14. The APY for 3% compounded monthly is ________.

14.

3.0416%

898

Question 21.15

15. Suppose that you invest $250 in an account that pays 4.5% interest compounded quarterly. After 30 months, how much is in your account?

  1. $279.08
  2. $279.59
  3. $279.71

15.

b

Question 21.16

16. The APY for 3% compounded daily is ________.

16.

3.04533%

Question 21.17

17. Which of the following pays more interest?

  1. 6% compounded annually
  2. 6% compounded monthly
  3. 6% compounded continuously

17.

c

Question 21.18

18. If you deposit $1000 at 6.2% interest compounded continuously, the balance after three years is ________.

18.

$1204.42

Question 21.19

19. If an account with $100 pays 6% interest compounded continuously, at the end of one year, you will

  1. be fabulously wealthy.
  2. be getting 6% APY.
  3. have earned only pennies more interest than 6% simple interest.

19.

c

Question 21.20

20. The APY for 3% compounded continuously is ________.

20.

3.04545%

Question 21.21

21. Which of the following is the most generous interest rate for a one-year CD?

  1. 6% simple interest
  2. 5.9% compounded annually
  3. 5.9% compounded continuously

21.

c

Question 21.22

22. The value of is approximately ________.

22.

2.718

Question 21.23

23. The number is

  1. irrational.
  2. irrelevant.
  3. irrotational.

23.

a

Question 21.24

24. Depositing $100 on a child’s annual birth date at ages 1 through 18 years is an example of a(n) ________.

24.

annuity (or sinking fund)

Question 21.25

25. The sum of the geometric infinite series is

  1. infinite.
  2. 2.
  3. .

25.

b

Question 21.26

26. If your investments earned 4.5% last year but inflation was 1.0%, the real rate of growth of your investments was ___________%.

26.

3.46535%

Question 21.27

27. An example of exponential decay is

  1. the depreciation of factory equipment.
  2. a retirement annuity.
  3. the CPI.

27.

c (or a)

Question 21.28

28. If a new car costs $18,000 and loses value at a rate of 20% per year, its value after 3 years is _________.

28.

$9216

Question 21.29

29. If your investment is growing but at a rate less than the rate of inflation

  1. you have a positive real growth in your investment.
  2. you do not have a positive real growth in your investment.
  3. you do not have enough information to determine whether the real growth is positive or negative.

29.

b

Question 21.30

30. According to the CPI, a market basket of goods that cost $100 in mid-2000 would cost ___________ in mid-2015.

30.

$140.71