1. If you invest $175 and earn a rate of return of 11%, how much money will you

Question

1. If you invest $175 and earn a rate of return of 11%, how much money will you have in 1 years?

A. $1,591

B. $194.25

C $155.75

D. None of the answers are correct

2. What is the yield on an investment that costs $115, and promises to pay $200 in two years?

A. 73.91%

31.9%

20.26%

None of the answers are correct

3. What is the yield on an investment that costs $110, and promises to pay $115 in one year?

4.5%

-4.35%

2.25%

None of the answers are correct

4. The Market Value of any contract is the present value of the remaining payments discounted at the market rate.

True

False

A. 73.91%

31.9%

20.26%

None of the answers are correct

Explanation / Answer

Q1
Answer
FV=PV*(1+i)^n
PV=present value=175
FV=future value=?
i=interest rate=11%
n=1
FV=175*(1.11)
=194.25
Option B
--------------
Q2
Using the same formula
200=115*(1+i)^2
(1+i)^2=(200/115)

i=(200/115)^(1/2) -1
=0.318760947
=31.9%
Option B
-----------
Q3
Using the same formula
115=110*(1+i)
1+i=115/110
i=0.04545455
i=4.5%
Option A
-------------
Q4
True
The Market value of any contract is the PV of the contract calculated at the market rate

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