94 Review Questions (Part I)

Chapter 9 Review Questions Part I

1. All other things being the same, would you prefer a bank account that compounds interest quarterly or one that compounds interest semiannually?

2. Briefly describe the concept of future value within the context of the larger overall concept of the time value of money.

3. Which of the following two options will give you the greatest future value: (A) an initial deposit of $100 earning 20% per year, compounded annually and left to grow for 10 years, or (B) an initial deposit of $75 earning 12% per year, compounded monthly and left to grow for 15 years?

4. If a savings account pays interest on a quarterly basis and you are performing future value calculations on deposited amounts, how can you calculate the rate?

5. Briefly describe the relationship among consumer savings, purchasing power, and inflation.