# FIN 370T Wk 2 – Apply: Homework

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## FIN 370T Wk 2 – Apply: Homework

If an average home in your town currently costs \$300,000, and house prices are expected to grow at an average rate of 5 percent per year, what will an average house cost in 10 years?

Multiple Choice

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\$507,593.74

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\$488,688.39

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\$483,153.01

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\$450,000.00

We call the process of earning interest on both the original deposit and on the earlier interest payments

Multiple Choice

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•
•
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What is the future value of \$1,000 deposited for one year earning 5 percent interest rate annually?

Multiple Choice

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\$1,000

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\$2,050

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\$1,005

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\$1,050

When your investment compounds, your money will grow in a(n) __________ fashion.

Multiple Choice

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static

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linear

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exponential

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implied

An average home in Chicago costs \$295,000. If house prices are expected to grow at an average rate of 3 percent per year, what will a house cost in five years?

Multiple Choice

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\$338,941.27

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\$341,985.85

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\$347,028.19

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\$328,995.61

Which of the following statements is incorrect with respect to time lines?

Multiple Choice

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A helpful tool for organizing our analysis is the time line.

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Interest rates are not included on our time lines.

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Cash flows we receive are called inflows and denoted with a positive number.

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Cash flows we pay out are called outflows and designated with a negative number.

What is the future value of \$2,500 deposited for one year earning a 14 percent interest rate annually?

Multiple Choice

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\$2,550

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\$3,150

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\$2,850

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\$2,950

Compute the present value of \$9,000 paid in four years using the following discount rates: 4 percent in year 1, 5 percent in year 2, 4 percent in year 3, and 3 percent in year 4.

rev: 10_14_2017_QC_CS-105529

Multiple Choice

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\$8,543.26

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\$9,000.00

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\$10,823.01

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\$7,693.95

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