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

$507,593.74

$488,688.39

$483,153.01

$450,000.00

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

Multiple Choice

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

Multiple Choice

$1,000

$2,050

$1,005

$1,050

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

Multiple Choice

static

linear

exponential

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

$338,941.27

$341,985.85

$347,028.19

$328,995.61

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

Multiple Choice

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

Interest rates are not included on our time lines.

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

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

$2,550

$3,150

$2,850

$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

$8,543.26

$9,000.00

$10,823.01

$7,693.95